As our Finance Minister said while presenting union budget 2023 in parliament on 1st February 2023-
“salaried class and the pensioners including family pensioners, for whom I propose to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs. 15.5 lakh or more will thus stand to benefit by Rs.52,500.
We are also making the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime.”
By Budget 2023 Finance Minister took a great initiative To stop bad practices of fake deductions.
The new tax regime for Individual and HUF, introduced by the Finance Act 2020, is now proposed to be the default regime.
It means from Assessment year 2024-25 Individual and HUF have automatically covered under New Tax Regime and if want then they can change their preferences from New to old regime. Any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime. For those person having income under the head “profit and gains of business or profession” and having opted for old regime can revoke that option only once and after that they will continue to be taxed under the new regime. For those not having income under the head “profit and gains of business or profession”, option for old regime may be exercised in each year.
In the other word Assessee can opt New and old regime each year only when they do not have PGBP income. If any Assessee having Income From PGBP once they opt New Tax regime can not eligible to change it from New to Old regime.
Resident individual under the new regime will not pay tax if their total income is up to Rs. 7,00,000. But if total income exceeds Rs. 700000 they need to pay tax as per new Tax slab Rate. i.e. (up to Rs. 300000- NIL), (Rs. 300001 to Rs. 600000- 5%), (Rs. 600001 to Rs. 900000- 10%), (Rs. 900001 to Rs. 1200000- 15%), (Rs. 1200001 to Rs. 1500000- 20%), and (above Rs. 1500000-30%)
Also, Standard deduction of Rs. 50,000 to salaried individual and deduction from family pension up to Rs. 15,000 are proposed to allowed in New Tax regime.
No other changes in New Tax regime under Section 115BAC (i.e allowances, HRA and other deduction are not available)
Example:-
Mr. Modi is a salaried employee and his salary is Rs. 970000.
New Tax regime
Salary income Rs. 9,70,000
less:- Standard deduction Rs. 50,000
Total income Rs. 920,000
Tax Calculation
upto Rs. 300000 NIl
next Rs. 300000 – 5%= Rs. 15000
Next 300000- 10%= Rs. 30000
Next 20000- 15%= Rs. 3000
Total Tax Rs. 48,000
Surcharge 4%=Rs. 1920
Total Tax payable= Rs.49,920
******
For Further detail or queries Mail at:- [email protected].
Author Bio
Thanks CA Rahul Anand
Will standard deduction be available in new regime for pension holders?
As per your statement in example “He is not required to pay any tax”, but as per your calculation tax amount is Rs. 49,920/-.
Please clarify.
Dear Sukhdarshan Singh ji,
My statement is “Resident Individual in New Tax regime is not required to pay Tax, if income is up to 7,00,000. But if total income exceeds Rs. 700,000, they need to pay tax as per new Tax slab Rate”.
In my example Mr.Modi’s salary is 9,70,000 which is more than 7,00,000 and therefore Tax need to be calculated and paid as per New Tax slab rate basis.
and hence, Tax is calculated above.
if still you have any queries mail me.
please see clearly as per the statement he’s saying that the person earning more than 7 lakhs have to pay the tax.. and in the example it is clear that mr. Modi’s salary is Rs 970000 which is more than 7 lakhs so he has calculated the tax there.
In the example in your article, you have mentioned that Mr. Modi’s is not required to pay tax under new regime. At the end, you have calculated his tax liability as 49420.00. How do you reconcile these two contradictory statements ?
Dear G C Tewari ji,
I have not mentioned that Mr. Modi is not required to pay tax.
My statement is “Resident Individual in New Tax regime is not required to pay Tax, if income is up to 7,00,000. But if total income exceeds Rs. 700,000, they need to pay tax as per new Tax slab Rate”.
In my example Mr.Modi’s salary is 9,70,000 which is more than 7,00,000 and therefore Tax need to be calculated and paid as per New Tax slab rate basis.
and hence, Tax is calculated above.
if still you have any queries mail me.
Your good self have arrived as taxable income at ₹9,20,000/- and tax with surcharge payable thereby as ₹49,920/- When taxable income exceeds ₹7,00,000/- an assessee will not get rebate at all. However you have mentioned in your example that Mr Modi is not required to pay any tax at all. Can you please elaborate as to how it is possible?
Dear S. Vishwanatha Gupta ji,
I have not mentioned that Mr. Modi is not required to pay tax.
My statement is “Resident Individual in New Tax regime is not required to pay Tax, if income is up to 7,00,000. But if total income exceeds Rs. 700,000, they need to pay tax as per new Tax slab Rate”.
In my example Mr.Modi’s salary is 9,70,000 which is more than 7,00,000 and therefore Tax need to be calculated and paid as per New Tax slab rate basis.
and hence, Tax is calculated above.
if still you have any queries mail me.
In example you mentioned that he is not required to pay any Tax. But at the end of calculation you wrote, total payable tax is 49920.
It is confusing.
Dear Vasudev Agrawal ji,
I have not mentioned that Mr. Modi is not required to pay tax.
My statement is “Resident Individual in New Tax regime is not required to pay Tax, if income is up to 7,00,000. But if total income exceeds Rs. 700,000, they need to pay tax as per new Tax slab Rate”.
In my example Mr.Modi’s salary is 9,70,000 which is more than 7,00,000 and therefore Tax need to be calculated and paid as per New Tax slab rate basis.
and hence, Tax is calculated above.
if still you have any queries mail me.
Why standard deduction of Rs. 52,500/- is not reduced instead of only Rs. 50,000/-. Thus tax payable would be only Rs. 49,530/- and not Rs. 49,920.
Mr. Unnikrishnan ji,
In Budget speech our finance minister said that “Each salaried person with an
income of ` 15.5 lakh or more will thus stand to benefit by ` 52,500.”. It means salaried employee whose salary income is more than equal to 15,50,000 shall get benefit of minimum 52,500 now after this amendmend.
Let me explain it by an example.
Mr. Modi’s salary income is Rs.15,50,000
and if amendmend not come in force then total tax paid by Mr.Modi under New Tax regime would be Rs.152,000 (before cess) [12500+25000+37500+62500+15000] and after amendmend in New Tax regime Mr.Modi need to pay only Rs.150,000 (before cess) [15000+30000+45000+60000].
hence tax benifit of Rs.2500 and standard deduction of Rs.50,000 total benefit in New Amendmend is Rs.52,500.
so the standard deduction is 50,000 only and not 52,500.
in your example – Quote
Mr. Modi is a salaried employee and his salary is Rs. 970000.
New Tax regime. He is not required to pay any tax. – Unquote
u say not required to pay any tax and below give tax calculation.
Dear Ganesh ji,
My statement is “Resident Individual in New Tax regime is not required to pay Tax, if income is up to 7,00,000. But if total income exceeds Rs. 700,000, they need to pay tax as per new Tax slab Rate”.
In my example Mr.Modi’s salary is 9,70,000 which is more than 7,00,000 and therefore Tax need to be calculated and paid as per New Tax slab rate basis.
and hence, Tax is calculated above.
if still you have any queries mail me.
awesome article brother 👍
Thanx everyone.
one query asked by Mr.Unnikrishna ji that in budget standard deduction to salaried employee is given 52,500 and not 50,000. then why i took 50,000 in my example.
Answer:-
sir, in Budget speech our finance minister said that “Each salaried person with an
income of ` 15.5 lakh or more will thus stand to benefit by ` 52,500.”. It means salaried employee whose salary income is more than equal to 15,50,000 shall get benefit of minimum 52,500 now after this amendmend.
Let me explain it by an example.
Mr. Modi’s salary income is Rs.15,50,000
and if amendmend not come in force then total tax paid by Mr.Modi under New Tax regime would be Rs.152,000 (before cess) [12500+25000+37500+62500+15000] and after amendmend in New Tax regime Mr.Modi need to pay only Rs.150,000 (before cess) [15000+30000+45000+60000].
hence tax benifit of Rs.2500 and standard deduction of Rs.50,000 total benefit in New Amendmend is Rs.52,500.
so the standard deduction is 50,000 only and not 52,500.
thanx shubham.
thanks for the information. it was really needed.
Kudos!
Thanx brother.
good one sir 👍
This is beneficial for us and it’s provided more clarity.. keep writing like this..
Thanx Reena ji.