Explore the changes in the Income Tax regime post-Budget 2023 and determine whether the Default or Old Tax Regime is more beneficial for you. Understand the implications, benefits, and factors influencing your choice for optimal tax planning.
The Budget 2023, announced so many changes, out of which one change contains very important information, however most people are failing to understand it.
Here, we are talking about the Income tax regime. In simple words, this is about the Income tax slab rate and benefits we were talking earlier and now.
From FY 2023-24, the NEW TAX REGIME is a default scheme and whoever not opting the old regime, it intentionally will automatically be liable to comply with the New TAX regime. A taxpayer can opt for any tax regime at the time of filing an Income tax return every year. However, salaried employees are required to take a decision initially in starting of the month i.e. before 30th April so that their TDS can be deducted according to the slab rate beneficial to them otherwise Employer will default the regime i.e. New Tax Regime.
Before choosing the tax regime, you must know which one is more suited to you according to your investments, savings, and expenses. Once selected, your employer will not be able to change it in between the Financial year.
Now, let’s understand it with an example, what are the issues and benefits of each regime, and which regime is beneficial for you?
- Income upto 5 Lacs – Before or after deductions, go with the Old tax regime, and no need to pay taxes
- Income upto 7.5 lacs – Go with the New tax regime, without any taxes
- Income above Rs 7.5 lakh – If you want to claim higher deductions, then on Income above 7.5 lacs, better to go with the Old tax regime.
- Income above 5 Crores- Go with the New tax regime due to a reduction in the rate of Surcharge from 37% to 25%. It seems the new tax regime is beneficial for the people who have basic earnings plus the high-earning people.
It depends on your income that which regime you have to choose.
It is advisable to do your own calculations first considering your Income, Deductions, and exemptions. The old regime also has a number of deductions and exemptions. Suppose, You are paying a home loan, and the old regime is giving you the benefit of the deduction on the interest component, which is up to Rs 2 lakh in a financial year, which can be the favorable point to go in favor of the old regime. So, you will have to calculate your case and then come to a conclusion about the tax regimes.
Every individual/HUF having income above the exemption limit is required to get their Income tax return filed even though they are not liable to pay any taxes as they are falling under the exemption category.
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