Currently, there are two income tax slabs from which a salaried individual has to choose one every year. The income tax rates for these slabs are different. The old income tax regime continues with the existing tax exemptions and deductions. The new income tax regime offers lower income tax rates and more slabs with no option of availing tax exemptions and deductions. These tax slabs under the new tax regime has been revised from April 1, 2023.
Additionally, the new income tax system is adopted as the default tax system. Individuals will, however, have the choice to stick with the previous income tax system. The highest rate surcharge has been decreased by the government from 37% to 25% under the new tax system.
The finance minister has proposed new income slabs that will reduce the middle-income earner group’s overall tax burden in FY 2023–2024.
The amended income tax rates under the new tax law for the financial year 2023–24 (AY 2024-25)
| Income Tax slabs under new tax regime | Income Tax rates under new tax regime |
| 0 to 3 Lakh | 0 |
| Rs 3 Lakh to Rs 6 Lakh | 5% |
| Rs 6 Lakh to Rs 9 Lakh | 10% |
| Rs 9 Lakh to Rs 12 Lakh | 15% |
| Rs 12 Lakh to Rs 15 Lakh | 20% |
| Above Rs 15 Lakh | 30% |
Ongoing through the above, it is to be noted that following deductions/benefits shall not be available in case if Individual adopts for new tax structure: –
1. All the deductions under Chapter VI-A other than deduction under section 80CCD(1B) & standard deduction of Rs 52,500 will not be eligible which means deduction of Rs.1,50,000/- in respect of long-term savings like life insurance scheme, contribution to PF, PPF and NPS, NSC, long term fixed deposits etc. shall not be available in case the individual opts to pay tax at new rates. Deduction on account of donation under section 80G, deduction on account of interest on loan taken for higher education under section 80E, deduction on account of interest on saving bank account of Rs.10,000/- under Section 80TTA shall also not be available.
Comparative analysis of alternate tax with regular tax rates
|
Income |
Tax liability as per old structure | Tax liability as per new structure | Tax savings under new option |
| Up to 5 Lakh | – | – | – |
| Rs 7 Lakh | 54600 | Upto 7 Lakh (Nil) | 54600 |
| Rs 8 Lakh | 75400 | 36400 | 39000 |
| Rs 9 Lakh | 96200 | 46800 | 49400 |
| Rs 10 Lakh | 117000 | 62400 | 54600 |
| Rs 12 Lakh | 179400 | 93600 | 85800 |
| Rs 15 Lakh | 273000 | 156000 | 117000 |
However, considering the fact that all exemptions and deductions shall not be available, it may not be advisable to exercise such option particularly in the case of salaried taxpayers as the benefit of the exemption/deduction foregone will be far higher as compared to the reduced tax rates. The below table depicts the impact of such new provision in respect of individuals or HUF’s having different level of income who are claiming deduction of Rs.5 0,000, Rs.1,00,000, Rs. 1,50,000, Rs. 2,00,000, Rs. 2,50,000, Rs. 3,00,000 and Rs. 350000
A) Cases where deductions and exemptions are being availed upto Rs.50,000/-
|
Total Income of the Assessee before availing deductions/ exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | 44200 | – | 44200 |
| 800000 | 65000 | 36400 | 28600 |
| 1000000 | 106600 | 62400 | 44200 |
| 1300000 | 195000 | 114400 | 80600 |
| 1700000 | 319800 | 218400 | 101400 |
| 2000000 | 413400 | 312000 | 101400 |
B) Cases where deductions and exemptions are being availed upto Rs.1,00,000/-
|
Total Income of the Assessee before availing deductions /exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | 33800 | – | 33800 |
| 800000 | 54600 | 36400 | 18200 |
| 1000000 | 96200 | 62400 | 33800 |
| 1300000 | 179400 | 114400 | 65000 |
| 1700000 | 304200 | 218400 | 85800 |
| 2000000 | 397800 | 312000 | 85800 |
C) Cases where deductions and exemptions are being availed upto Rs.1,50,000/-
|
Total Income of the Assessee before availing deductions/ exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | 23400 | – | 23400 |
| 800000 | 44200 | 36400 | 7800 |
| 1000000 | 85800 | 62400 | 23400 |
| 1300000 | 163800 | 114400 | 49400 |
| 1700000 | 288600 | 218400 | 70200 |
| 2000000 | 382200 | 312000 | 70200 |
D) Cases where deductions and exemptions are being availed upto Rs.2,00,000/-
|
Total Income of the Assessee before availing deductions/ exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | – | – | – |
| 800000 | 33800 | 36400 | (2600) |
| 1000000 | 75400 | 62400 | 13000 |
| 1300000 | 148200 | 114400 | 33800 |
| 1700000 | 273000 | 218400 | 54600 |
| 2000000 | 366600 | 312000 | 54600 |
E) Cases where deductions/ exemptions are being availed upto Rs.2,50,000/
|
Total Income of the Assessee before availing deductions/ exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | – | – | – |
| 800000 | 23400 | 36400 | (13000) |
| 1000000 | 65000 | 62400 | 2600 |
| 1300000 | 132600 | 114400 | 18200 |
| 1700000 | 257400 | 218400 | 39000 |
| 2000000 | 351000 | 312000 | 39000 |
f) Cases where deductions and exemptions are being availed upto Rs.3,00,000/-
|
Total Income of the Assessee before availing deductions/ exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | – | – | |
| 800000 | – | 36400 | (36400) |
| 1000000 | 54600 | 62400 | (7800) |
| 1300000 | 117000 | 114400 | 2600 |
| 1700000 | 241800 | 218400 | 23400 |
| 2000000 | 335400 | 312000 | 23400 |
G) Cases where deductions and exemptions are being availed upto Rs.3,50,000/-
|
Total Income of the Assessee before availing deductions/ exemptions |
Tax liability as per the old structure (after taking benefit of deductions and exemptions) | Tax liability under new structure (without benefit of deductions and exemptions) | Savings under the new regime |
| 700000 | – | – | |
| 800000 | – | 36400 | (36400) |
| 1000000 | 44200 | 62400 | (18200) |
| 1300000 | 106600 | 114400 | (7800) |
| 1700000 | 226200 | 218400 | 7800 |
| 2000000 | 319800 | 312000 | 7800 |
Whether such exemptions and deductions are eliminated, and the tax rates are subsequently lowered, will have an effect on the taxpayer is a moot point. The eventual tax payment is something that the taxpayer anticipates, therefore if even after a drop in tax rates, the total amount due as a result of the removal of exemptions or deductions increases, the taxpayer will not be happy with that situation. Given the analysis shown above, it is clear that the new alternative tax rate and the ensuing removal of the exemption and deduction may not significantly lower the net tax liability of a large number of taxpayers. Consequently, a sizable proportion of taxpayers would decide to continue to be subject to the current tax slab rates rather than choosing to pay tax under these new tax slabs.
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What are benefits, exemptions, deductions ,rebates etc available to senior citizens/super senior citizen having only interest income under new regime