New Tax Regime: Navigating The New Deductions List For 2024

Hi Readers! Are you aware of the recent budget updates held in our New Parliament. In the financial year 2023-24, for which the changes shall be applicable to the assessment year 2024-25, the Government of India has brought quite a number of alterations in the income tax structure. The regime has been proposed, considering the ease of things related to tax filing and flexibility for the taxpayer, pursuing greater benefit for people with lower investments. Detailed is the new tax regime, broken down into its slabs and procedural changes as follows.

Detailed Structure of the New Regime

Do you want to know the slabs of the New Tax Regime, without any waste of time the list is presented below.

The income tax slabs for individuals under the new regime for FY 2023-24 (AY 2024-25) are as follows:

NEW TAX REGIME LIST FOR THE FISCAL YEAR 2024-2025

Further, exemption limits from income tax found under the new tax regime vary with age as follows:

• Individuals and HUF below 60 years and NRIs: Up to ₹2,50,000
• Senior citizens (60-80 years): Up to ₹3,00,000
• Super senior citizens above 80 years: Up to ₹5,00,000

Major Procedural Changes

The most important change for FY 2023-24 is that, by default, it will shift to the new tax regime. Under the old regime, a taxpayer was required to furnish Form 10-IE if he wishes to opt for the new tax regime. Otherwise, they will be governed under the old regime. Now, the new tax regime has become the default and a taxpayer willing to opt under the old regime has to file a declaration in Form 10-IEA before the due date. In case of failure to file the form within the due date, it would be compulsorily governed under the new tax regime, losing almost all deductions and exemptions.

Income Tax Computation

Below is an example of income tax computation for FY 2023-24 under the old regime:

ILLUSTRATION: Rohit has a taxable income of ₹8,00,000.

• Income up to ₹2,50,000: Nil
• ₹2,50,000 – ₹5,00,000: 5% on ₹2,50,000 = ₹12,500
• ₹5,00,000 – ₹8,00,000: 20% on ₹3,00,000 = ₹60,000
• Total Tax: ₹72,500
• Cess (4%): ₹2,900
• Total tax liability: ₹75,400

Major Procedural Changes of the New Tax regime 

One of the biggest changes effected in F.Y. 2023-24 is automatic transition to the new tax regime. While the old system required taxpayers to file Form 10-IE to select the new regime, by default all taxpayers were said to be in the old regime if Form 10-IE was not filed. Now, the default is shifted to the new regime, and taxpayers have to file Form 10-IEA if they intend to opt for the old regime before the due date. In case the form is not filed within the due date, they have to file under the new regime, which disallows almost all deductions and exemptions.

How To Calculate Income Tax

The following is the example of income tax computation under the old regime for FY 2023-24.

Illustration: Rohit has an income that is taxable to the extent of ₹8,00,000.

• Income up to ₹2,50,000: Nil
• ₹2,50,000 – ₹5,00,000: 5% on ₹2,50,000 = ₹12,500
• ₹5,00,000 – ₹8,00,000: 20% on ₹3,00,000 = ₹60,000
• Total Tax: ₹72,500
• Cess (4%): ₹2,900
• Total tax liability: ₹75,400

Surcharge and Cess

In the case of high-income earners, the following additional surcharge rates will be applicable:

• 10% for income > ₹50 lakh and < ₹1 crore
• 15% for income > ₹1 crore and < ₹2 crore
• 25% for income > ₹2 crore and < ₹5 crore
• 37% for income > ₹5 crore reduced to 25% under new regime from April 2023

A 4% Health and Education cess is added to the income tax liability in all cases.

Domestic Companies Tax Rates

Now, the following concessional tax rate has been provided under the new regime for domestic companies, namely —

• 15% for companies incorporated after 1 October 2019, on satisfaction of certain conditions specified in Sec. 115BAB,
• 22% for companies when conditions of Sec. 115BAA are satisfied
• 25% for companies, if conditions of Sec. 115BA are satisfied.

What is New in This Budget from the Previous Fiscal Year?

The following is the analysis of what the necessity of a budget is all about:  

Every economy needs a budget as it is a significant monetary plan that has various uses to the government, institutions, and people. Here’s why a budget is necessary: 

Financial Planning and Management

Control and Allocation

A budget is of utmost importance for this plays a big role in leading many organizations and businesses in the right direction when it comes to resource allocation. 

Expense Management

It gives a mechanism of identifying expenditure risks, moderating on them and achieving constructive control of expenditures. 

Economic Stability

Fiscal Responsibility

In a way a budget seeks to control spending and borrowing hence reflecting efficiency in matters to do with economic policies within a nation. 

 Inflation Control

These clearly explain that through proper budgeting a country is in a position controlling inflation through money supply and government spending. 

Resource Optimization

Maximizing Utilization

Budgets help in identifying places where resources should be invested and where they should not be wasted and every dollar that is spent is eased into the budget. 

Strategic Investments

It enables purposeful spending in sectors that hold the potential of stimulating an economy’s growth and development, like the physical construction sector, the education sector, and technology among others. 

Accountability and Transparency

Public Trust

This in turn lead to the and increase in transparency of the budgeting process which increases the amount of trust from the public on how their monies are being spent. 

Performance Measurement

It helps in determining the effectiveness of a number of programs and activities so that one can know whether they are meeting their objectives or not. 

Goal Setting and Prioritization

Objective Achievement

They assist in developing and understanding the financial plans and directions in order to meet the corporation’s goals for resource alignment. 

Long-term Planning

 It assists in planning for the future by estimating revenues and expenses for the periods to come which assists in planning for the future challenges and opportunities.  

Crisis Management

Emergency Preparedness

A budget is a guideline on how to save and properly apply the money in cases of emergencies and other incidents so that there is preparedness in terms of money. 

Summing up, it would like to underline that the concept of budget is incontestable for the efficient financial management, economic stability and any kinds of strategical planning. It guarantees effective and proper use of resources, achievement of the planned targets, and sound fiscal position. 

Old vs New Tax Regime

The new regime will benefit middle-class taxpayers whose taxable income goes up to ₹15 lakh and who have lower investments. In this new regime, there are six lower-income tax slabs. Therefore, it might be convenient for those who do not claim too many tax deductions. The old regime has been more favorable for high-income earners and those with substantial investments in tax-saving instruments.

How to Decide Between Old and New Regime?

Accordingly, taxpayers opt for both regimes, old and new, based on their income structures and investment strategies. In the case of salaried persons, the option has to be exercised at the beginning of the financial year, while in the case of persons having a business income, the same is at their option only once in a lifetime.

Conclusion

The new tax regime  in India in 2024 will revolve around the rationalization of the taxation system, with advantages accruing to the middle class by way of reduced rates and less deductibility of matters. This looks pretty good for those with lower investments. In the case of high-income earners and people with large investments, the old regime might be better. Taxpayers need to work out both regimes and decide which one is more advantageous according to their income and financial planning.

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