It was with the announcement of Budget 2023 that a New Tax Regime and a new income tax slab were announced. This is to become the income tax slab for 2023-2024. The new tax regime income tax slabs are vividly different from the old tax regime.
The income tax slabs 2023-24 are how different and various taxes are applied to various income ranges and groups. The new tax slab 2023-24 will ensure that whenever there is an increase in income, one also has a subsequent rise in the taxes that they have to pay. The central government also ensured that various lucrative incentives were added in the Budget 2023 that would allow individuals to be attracted to the New Tax Regime and also to the tax slab 2023.
All these changes in the new tax slab 2023 and the introduction of the new regime tax slab 2023-24 are indicative that the government eventually wants to remove the old tax regime and make the new regime tax slab the mainstay of the day. The new income tax regime shall be applicable for the financial year 2024-2025 and will be put under assessment by the government in 2025-2026.
What is the New Tax Regime?
It was in the Budget 2020 that the New Tax Regime was introduced by the government for the first time. In this New Tax Regime tax slabs were introduced. The tax slab 2024-25 was introduced in the year 2023.
The New Tax Regime emerged with the promise that the tax slabs shall be changed and taxpayers will be given certain reduced tax rates. The one drawback of the New Tax Regime is that individuals will not enjoy the exemptions and deductions. This did not attract a lot of individuals.
But, in 2023 the government under Finance Minister Nirmala Sitharaman introduced some other changes to the New Tax Regime:-
- Higher Tax Rebate Limit
- Streamlined Tax Slabs
- Standard Deduction and Family Pension Deduction
- Reduced Surcharge for High Net-Worth Individuals
- Higher Leave Encashment Exemption
Income tax slab for ay 2023-24 and Income tax slab for FY 2023-24
In the Union Budget 2020, the government provided a New Tax Regime that was provided with a lower tax rate. The government also denied most tax exemptions and deductions in the New Tax Regime. These new tax regime slabs were to become the tax slab 2023-24.
The New Tax Regime also issued an easier way to file the tax. The income tax slabs under this New Tax Regime are:-
Up to INR 2.5 lakh: Nil
2. INR 2.5 lakh – 5 lakh: 5%
3. INR 5 lakh – 7.5 lakh: 10%
4. INR 7.5 lakh – 10 lakh: 15%
5. INR 10 lakh – 12.5 lakh: 20%
6. INR 12.5 lakh – 15 lakh: 25%
7. Above INR 15 lakh: 30%
Under the New Tax Regime, taxpayers cannot claim popular deductions like Section 80C, 80D, 80E, HRA, and the standard deduction. However, the lower tax rates might still result in lower tax liability for individuals with fewer investments in tax-saving instruments.
About the Old Tax Regime
It is very important to ascertain that the Indian taxpayers are now at liberty to select between two different tax structures, which are the old tax structure and the new tax structure. In fact, each regime has its strengths and weaknesses and does not leave everyone indifferent to it as a tool to deal with various monetary and financial affairs. Thus, this article will enable you to discover some primary distinctive features as well as give you the necessary guidance in order to make the right choice. The New Tax Regime or the old tax regime, you should choose what suits you right.
The old tax regime was a taxation policy that had a higher rate of taxes compared to the current taxation policy but had many deductions and exemptions to the taxpayers. The system lets the taxpayers have very high reductions to their assessable income using the provisions in this range. Here are some of the key deductions and exemptions available under the old tax regime:
Here are some of the key deductions and exemptions available under the old tax regime:
Standard Deduction
In order to determine the relief in respect of salary income, employees can avail a standard deduction of up to INR 50,000. The standard deduction in the new tax regime is thus very different from what it was in the old tax regime.
House Rent Allowance (HRA)
For residents of rent-paid houses, which salaried employees often are, tax saving is possible when they claim HRA.
Leave Travel Allowance (LTA)
Any expenditure made in India for travel can be actually allowed as part of the LTA.
Section 80C Deductions
Absorption of INR 1 is allowed for life insurance premiums, contributions to the Public Provident Fund (PPF), the National Savings Certificate (NSC), and tuition fees among others as investments and expenses. 5 lakh.
Home Loan Interest (Section 24)
Income tax exemption for interest paid on home loans is allowed to the extent of up to INR 2 lakh, while the property is let or is a self-occupied property out of the maximum two houses which can be claimed as self-occupied.
Other Deductions under Chapter VI-A
Others are health insurance premium deduction under Section 80D, the deduction for interest on education loans under Section 80E), etc., and donations to charitable organizations under Section 80G.
What Should One Choose? – The New Tax Regime or the Old Tax Regime?
Before you decide to choose which option will be better for you, you should take into consideration a number of factors. You should look into your current financial standing and what your investment planning is. The new tax regime of 2023 shall be beneficial for you only if it matches your economic condition of the time.
Some of the characteristics and factors of the New Tax Regime and the old tax regime that you should look into before making a decision are:-
Deduction and Exemption
If you have been investing in different kinds of tax-saving instruments and are acquiring a good amount of deduction, then you should stick to the old tax regime rather than the new tax regime.
Income
You also need to compare and understand that under which regime you shall be having to pay a higher rate of taxes. If you are someone who has a lower income and does not have to go through a huge amount of deduction, then the New Tax Regime shall be beneficial for you.
Simple
If you are someone who enjoys a straightforward procedure when it comes to the filing of tax, then you should certainly go for the New Tax Regime. It has a very easy, seamless and flexible procedure.
Conclusion
Whether it be the old tax regime or the New Tax Regime, both have their merits and demerits. You should choose the required option by scaling your own financial background. While the old tax regime will provide you with substantial deductions, the biggest advantage of the New Tax Regime is that it provides lower tax rates.
You need to understand and compare your tax liabilities under both the regimes and see what suits you more. You should be going with the tax structure that is synonymous with your goals and will provide a substantial advancement to your career.
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