When you pay your income tax for the first time, the process may seem tedious and challenging and you may not understand certain terms. So, here are the basic income tax details and rules for beginners.

What Beginners Should Know About Income Tax?

New vs Old Tax Regimes

Old Tax Regime: As per the old structure of taxation, the assesses can claim the allowances, exemptions, and deductions with which they can plan how to save taxes.

The current tax structure is complex. The government has provided roughly 70 exemptions and deduction choices by adding sections to the Income Tax Act over years. This has helped Indian taxpayers reduce their taxable income to pay lower tax.

Certain exemptions included in your income are Leave Travel Allowance and House Rent Allowance. The deductions help you reduce your tax obligation by spending, saving or investing on certain items. Section 80C is the most generous deduction that allows you to bring down your taxable income by up to ₹1,50,000. Besides, there are many other deductions and exemptions available.

New Tax Regime: It comprises 6 new income tax slabs, each with a lower rate on income up to ₹15,00,000. Multiple deductions and exemptions are not available due to the differing tax rates and income tax slabs.

The new tax regime differs from the old one in these ways:

• The number of tax slabs has increased, and rates have been reduced in the range of ₹15,00,000 brackets.
• In the new regime, all the deductions and exemptions available under the old regime would be unavailable.

Understanding Salary Breakdowns

You should understand your salary structure because based on it, you must learn how to calculate income tax on salary and try filing income tax (IT) returns online. Your salary slip contains all the information including your basic salary, special allowance and house rent allowance depending on your company's policy and your salary structure. It even has details about the Employee Provident Fund, professional tax and tax deducted. The difference between these two components is the amount disbursed as your salary to your bank account.

TDS

It refers to tax deducted at source, i.e., deducted by the one making payment. The payee needs to deduct a certain amount of tax according to the rules of the Income Tax Department. The employer estimates the employee's total annual income and deduct tax on that if the employee's taxable income is over ₹2,50,000. You're allowed to claim a TDS refund.

Tax deduction is made as per the tax slab in India to which you belong in a year. Likewise, if you earn interest from an FD, the bank deducts TDS. As the bank doesn't know your tax slabs, it generally deducts TDS @ 10%. If you mention your PAN, TDS @ 20% may be deducted.

Tax Exemptions

These are like financial exclusions that can help reduce your taxable income. Such exemptions can help you bring down tax rates, avail tax reliefs or make sure that tax applies to your certain parts of your income only.

Learn how to file income tax returns online to save time and use an Indian income tax calculator online before IT e-filing.