Understand the implications of choosing between old and new tax regimes, their slabs, and deductions for optimal tax planning. Explore the benefits and conditions, helping you make informed decisions for Assessment Year 2024-25.
When the Budget announced by Finance Minister Smt Nirmala Sitaraman, every individual have a smile on his face for income tax slab announcement, even most people waiting only for this announcement in whole budget speech, because it will affect huge public. But when this announcement is made most of people misunderstood it, everyone thinks no tax on income upto 7 lac, upto 7 lac no need to pay tax, but there is a twist in understanding.
This exemption of 7 lac is conditional exemption not general exemption, if any individual opts for New Tax Regime Under section 115BAC then this benefit is for him and if any individual want to file his income tax return under old tax regime there is no change in his income tax slab his tax exemption limit is upto 5 lac not 7 lac
New tax regime is also known as Simplified Personal Tax Regime, New tax Regime is now ‘Default tax regime’ means that new system of taxation has replaced the previous one and is now standard method for calculation and collection of tax, unless the individual or businesses are specifically opt out and choose other system (Old Tax Regime)
Finance Minister Nirmala Sitharaman proposed to reduce the number of tax slabs under the clutter-free New Tax Regime from six to five. The revised tax slabs under the new regime will be applicable for Assessment Year (AY) 2024-25 or for the income made in FY 2023-24.
As per the latest tax slabs under the New Regime, individuals having an annual income of Rs 5-6 lakh will have to pay 5% tax while those earning Rs 6-9 lakh will have to pay 10% of their income as tax. Further, individuals earning Rs 9-12 lakh per year will pay 15% tax while those earning Rs 1215 lakh annually will pay 20% tax. The tax rate for individuals earning more than Rs 15 lakh will pay 30% tax.
Object behind this to making attractive this scheme, so most of individual opt in for new scheme, because after announcement of New tax scheme people don’t want to opt in for new tax regime due its not much beneficial for taxpayer, for paying tax at reduced rate will result to give up many more deduction benefit under chapter VIA
Same concept to be keep in mind by the individual or businesses for AY 2024-25, if taxpayer make investment with proper tax planning he will continue with old tax regime not for new tax regime, I will clarify it later on with example firstly we have to understand both tax regimes.
What is New tax Regime:
Currently, the Income Tax basic exemption limit and slabs for taxation under Simplified Personal Tax Regime for AY 2023-24 are as under:
| Upto Rs 2.50 lakhs | Nil |
| Income more than Rs. 2.5 lakhs up to 5 lakh | 5% |
| Income more than Rs. 5 lakhs up to 7.50 lakh | 10% |
| Income more than 7.50 lakhs upto 10 lakhs | 15% |
| Income more than 10 lakhs up to 12.50 lakhs | 20% |
| Income more than 12.50 lakhs up to 15 lakhs | 25% |
| Income above Rs. 15 Lakhs | 30% |
The assessee opting New Tax Regime are not entitled to claim any deductions.
> Deduction under Chapter VIA not available except Section 80CCD and 80JJA.
> Exemption under section 10AA.
> Salary Allowance except Travelling and conveyance Allowance.
> Leave travel Concession.
> Salary deduction under section 16.
> Interest deduction on self occupied house property.
> Additional depreciation.
> Deduction under section 33AB and 33ABA.
> Deduction under section 35 (Scintific Research).
> Deduction under section 35 AD ( for specified business).
> Deduction under Section 35CCC (Agricultural Project).
A. Simplified Personal Tax Regime for AY 2024-25 after Union Budget 2023-24
For the AY 2024-25, the basic exemption limit for New Tax Regime has been increased to Rs. 3 lakhs and number of tax slabs have bene reduced to five as under:
| Upto Rs 3.00 lakhs | Nil |
| Income more than Rs. 3 lakhs up to 6 lakh | 5% |
| Income more than Rs. 6 lakhs up to 9 lakh | 10% |
| Income more than 9 lakhs upto 12 lakhs | 15% |
| Income more than 12 lakhs up to 15 lakhs | 20% |
| Income above Rs. 15 Lkahs | 30% |
Conditions for availing deduction and exemption benefits are same as pe last year, no change in it.
For New Tax Regime however the maximum surcharge has been reduced from 37% to 25%
B. Income Tax Basic Exemption Limit and tax slabs/rates for AY 202425 after Union Budget 2023-24
No changes have been made to the existing basic exemption limit or in tax slabs/rates and will continue the same as for AY 2023-24 as under: Currently for AY 2023-24 the Income Tax rates and slabs for Individual, HUF, association of persons, body of individuals, artificial juridical person not exercising the option under Simplified Personal Tax Regime are as under:
(i) Individual resident aged below 60 years
| Income Slabs | Tax Rates | |
| i. | Where the taxable income does not exceed Rs. 2,50,000/-. | NIL |
| ii. | Where the taxable income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-. | 5% |
| iii. | Where the taxable income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. |
Rs. 12,500/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-. |
| iv. | Where the taxable income exceeds Rs. 10,00,000/-. | Rs. 112,500/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-. |
(ii) Senior Citizen of the age of 60 years or more but below the age of 80 years
| Income Slabs | Tax Rates | |
| i. | Up to Rs. 3,00,000/- | NIL |
| ii. | Where the taxable income exceeds Rs. 3,00,000/- but does not exceed Rs. 5,00,000/- |
5% |
| iii. | Where the taxable income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/- |
10,000/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-. |
| iv. | Where the taxable income exceeds Rs. 10,00,000/- | Rs. 110,000/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-. |
(iii) Super Senior Citizen individual resident of the age of 80 years or more
| Income Slabs Tax Rates | ||
| i. | Up to Rs. 5,00,000/-. | Nil |
| ii | Where the taxable income
exceeds Rs. 5,00,000/- but does not exceed Rs. |
20% of the amount by which the
taxable income exceeds |
| iii. | Where the taxable income exceeds ₹ 10,00,000/- | Rs. 100,000/- + 30% of the
amount by which the taxable |
Surcharge on income tax
(a) based on taxable income including capital gains on equity shares u/s 111A, 112 and 112A
| Up to total income of Rs 50 lakhs | Nil |
| Taxable income exceeding Rs. 50 lacs and upto Rs. 1 crore | 10% |
| Taxable income exceeding Rs. 1 crore but not exceeding Rs. 2 crore | 15% |
| Taxable income exceeding Rs. 2 crore but not exceeding 5 crores | 25% |
| Taxable income exceeding Rs. 5 crore but not exceeding Rs. 10 crores | 37% |
| Taxable income exceeding Rs. 10 crore | 37% |
(i) The maximum rate of surcharge on tax payable on dividend income or capital gain referred to in Section 112, shall be 15%.
(ii) The surcharge rate for AOP with all members as a company, shall be capped at 15%.
For New Tax Regime however the maximum surcharge has been reduced from 37% to 25%
Health and Education Cess:
Health and Education Cessis levied at the rate of 4% on the amount of income-tax plus surcharge
Difference between Old Tax Regime and New tax Regime:
| Particulars | Old Tax Regime | New Tax Regime |
| Deduction u/s 16 (standard deduction of 50000, entertainment allowance, professional tax) |
Allowed | Not Allowed |
| House Rent Allowance | Allowed | Not Allowed |
| Perquisites Exemptions except for Free Food Exceeding Rs. 50 per meal | Allowed | Not Allowed |
| Interest on Housing Loan | Allowed | Not Allowed |
| Deduction u/s 80C, 80D, 80U | Allowed | Not Allowed |
| Own contribution in NPS | Allowed | Not Allowed |
| Donation to funds/trust | Allowed | Not Allowed |
| Donation to Political Party | Allowed | Not Allowed |
| Saving bank interest upto 10000 | Allowed | Not Allowed |
| Interest on Education loan, E vehicle Loan | Allowed | Not Allowed |
In Old tax regime , Assessee can avail of deductions under Chapter-VIA, house rent allowance u/s 10(13A), LTA u/s 10(5), interest paid on house property, exemption under section 16 under salary head i.e. standard deduction of 50000, entertainment allowance, professional tax. However assessee cannot avail these deduction under new tax regime except 80CCD and 80JJA
So if assessee has incurred any kind of these investment like home loan, NPS, interest on education loan, medical insurance, LIC, he has to first calculate and compare his tax under both regime and accordingly opt in for new scheme or old scheme. New tax regime is beneficial for those assessee who doesn’t plan any tax management who doesn’t have any investment and deduction benefits to be give off.
Benefit of exemption upto 7 lac or 5 lac is opt through section 87A deduction, according to this only Resident individual assessee can opt it. If assessee opt new tax regime then he can avail deduction of tax payable or INR.25000 which ever is lower and if assessee opt old tax regime then deduction under section tax liability or INR. 12500 which ever is lower.
Presumptive taxation Limits U/S 44AD and U/S 44ADA Revised: Presumptive taxation limits for small business under section 44AD and for Professionals under section 44ADA have been revised subject to a condition that 95% of the receipt must be through online mode:
For Small Business U/S 44AD Rs. 3 Crore
For Professionals U/S 44ADA Rs. 75 Lakh
For Startups date of incorporation is 31 march 2024 for income tax benefits, and for setoff and carry forward of losses time limit has been increased to 10 year from incorporation
As per the budget amendment in section 87A if assessee opt for new tax regime exemption limit increased to Rs. 7 lakh, but if assessee remains in old tax regime then 87A exemption limit is Rs. 5 lac only.
Author Bio
According to the above no deduction u.s 16 is allowed. This was the position for FY 22-23 but for FY 23-24 Standard Deduction up to Rs. 50000 is allowed according to the budget announcement. Whether this has been changed later may be clarified