Every Taxpayer Must Know These 10 Key Budget Terms

Union Finance Minister Nirmala Sitharaman is set to present the interim budget on 1 Feb before the 2024 general elections, and the taxpayers are really hopeful for positive changes. The budget document uses many terms that you need to know to understand the budget better.

Tax Deduction

It is the amount of money that can be reduced from your total taxable income because you used that amount to make investments or the expenses incurred by you. It reduces your overall tax liability, which helps you save tax.

TDS

It stands for tax deduction at source and aims to collect the tax at the source of income. For example, your employer deducts TDS from your salary and deposits it to the central Government.

TCS

Tax collection at source is an additional amount collected as tax by a seller of specified goods from the buyer. This amount is over and above the selling price, and it’s deposited in the central government account.

Tax Saving Instruments

These are investments that help reduce your tax liability. They not only serve as great investment options but also reduce your tax liability.

Tax Surcharge

Individuals with high incomes are charged an extra 10% of the payable tax. So imagine you earn ₹1 crore; the tax would be ₹3 lakhs for this. Now there is an additional 10% charged to you, that is 10% of ₹3 lakhs. So, you end up paying more tax because of your high income slab.

Cess On Tax

It is an additional tax besides the basic tax you pay and is levied for a specific purpose. For example, the Government needed to raise funds to improve cleanliness services, so it levied a Swacch Bharat cess. A cess can be used only for the purpose it was raised for.

Rebate

It basically means a refund, the money that is returned to you for paying extra taxes. For example, if your tax liability is ₹20,000, but the bank pays the Government ₹30,000 TDS on your behalf, you are eligible for a tax rebate of ₹10,000.

Old Tax Regime

There were four income slabs in this system. People earning up to ₹2.5 lakhs were not charged any tax, while those above this and below ₹5 lakhs income were charged 5% tax. People earning between ₹5 to 10 lakhs paid a 10% tax, while those with incomes above ₹10 lakhs had to pay a 30% tax.

New Tax Regime

The new tax regime overhauled the old regime and changed the income slabs and chargeable income. So now people earning up to ₹3 lakhs don’t fall in the taxable income bracket, income group ₹3 lakh to ₹6 lakhs pay a 5% tax, ₹6 to 9 lakhs pay 10%, ₹9 to 12 lakhs pay 15%, ₹12 to 15 lakhs pay 20% and those earning above ₹15 lakhs pay a 30% tax.

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