Managing Income Tax Regime Choices

What are Income Tax Regimes?

The income tax regime refers to the set of rules defined by the government that prescribes the rate of tax along with the exemptions that can be claimed by a person on the basis of his income.

As per the Indian Income Tax Act, a salaried individual can choose to pay taxes under any of the two tax regimes formulated by the government:

1. Old Tax Regime or
2. New Tax Regime

As per the latest Finance Budget, all the employees are a part of the new tax regime by default. However, they can choose to pay taxes under the old tax regime. 
 

Old vs. New Tax Regime: Key Differences

Tax Rates

The tax slabs differ under the Old and New regimes. The New Regime generally offers lower rates but fewer exemptions.

Deductions and Exemptions

Configuring Employees Tax Regimes in Keka

You have 2 ways to update the tax regime for your employees. 

1. Individual Update: One employee at a time
2. Bulk Update: Multiple employees at a time

Individual Update: One employee at a time

1. Go to Payroll → Payroll Admin.

2. In the Operations tab, find the Tax Regime & Financial Details section.

3. Click Income Tax Regime of Employees.

   

4. Select the relevant Pay Group and Financial Year. Use filters like Location or Department if needed.

5. Click Run.

   

6. In the list of employees, click Update in the Actions column next to the desired employee.

 7. In the popup, select the appropriate tax regime and click Update.

Bulk Update: Multiple employees at a time

1. In the Income Tax Regime of Employees page, click Update IT Regime in Bulk.

   2. Click the Excel Template link to download the file.

   3. Fill in the tax regime details in the file and upload it via Upload Excel File.

 
 4. Review the preview screen for errors.

• If there are errors, fix them in the Excel file and re-upload.

5. Click Complete and confirm changes.

 
 

Allowing employees to update their tax regime

You can also configure the settings to allow your employees to switch their tax regimes before a defined cut-off date.

1. Go to Payroll → Settings → Pay Groups

2. Click the Settings icon for the desired Pay Group.

3. Open the Taxes and Deductions tab.

4. Click the three-dot menu and select Update Tax Regime.

 
5. Check the box Allow Employees to Change Their Tax Regime.

6. Set the cut-off date for existing and new employees.

7. Click Save.

Hope this was helpful in learning how to update the tax regime for employees and configure the settings that allow your employees to update their tax regimes as they wish.