Introduction: The fiscal year 2023-24 has witnessed significant amendments to the tax regime, unveiling a host of changes that impact individuals’ financial landscapes. In this comprehensive article, we delve into the intricacies of the altered tax structure, offering insights into revised slab rates, deductions, and the ongoing debate between the old and new tax regimes.
The new income tax slab rates:
The revised tax slab rates under the new tax regime for Financial Year 2023-24 (Assessment Year 2024-25) are as follows-
| Total Income | Rate of Tax |
| Upto Rs. 3,00,000 | Nil |
| Rs. 3,00,001-Rs. 6,00,000 | 5% |
| Rs. 6,00,001-Rs. 9,00,000 | 10% |
| Rs. 9,00,001-Rs. 12,00,000 | 15% |
| Rs. 12,00,001-Rs. 15,00,000 | 20% |
| Rs. 15,00,000 and above | 30% |
Also, the surcharge has been reduced from 37% to 25% for the taxpayers having annual income of more than Rs. 5 crores under the new tax regime. This means, that the surcharge change is applicable to only those having an income of more than Rs. 5 crores.
Income upto Rs. 7 lakhs will be tax-free from F.Y. 2023-24:
In Budget 2023, rebate under new regime has been increased to Rs. 7,00,000. Therefore, income upto Rs. 7,00,000 will be tax-free from FY 2023-24 (AY 2024-25). This is due to tax rebate under section of 87A of the Income Tax Act.
A tax rebate reduces the tax amount. It is allowed only to RESIDENT INDIVIDUALS.
While computing taxes, they are first calculated as per the slab rates. Then, if an assessee fulfills the conditions for rebate u/s 87A, the rebate shall be deducted from final tax amount bringing it down to zero. The only important thing is that rebate is allowable only to a resident individual.
Deductions available under the revised new tax regime:
Not all deductions are available under the new slab rates e.g., 80C, 80D, etc. Very few deductions are available-
a. For salaried individuals, standard deduction upto Rs. 50,000
b. On pension, standard deduction of Rs. 15,000 or 1/3rs of pension; whichever is lower
c. Employer’s contribution to NPS
d. Interest on home loan u/s 24B on Let Out Property
e. Section 80CCH – All contributions to Agniveer Corpus Funds
Also, leave encashment is available under the new tax regime. For Non-Government employees, the exemption threshold for leave encashment was increased from Rs. 3,00,000 to Rs. 25,00,000 in Budget 2023. Therefore, currently, at the time of retirement, leave encashment of up to Rs. 25,00,000 is tax free u/s 10(10AA).
The confusion of Rs. 7,00,000 and Rs. 7,50,000:
Finance Minister’s statement in the Budget Speech caused a lot of confusion among taxpayers regarding the quantum of income upto which no tax is required to be paid by the assesses. In Budget 2023, a tax rebate on an income up to ₹7 lakhs was introduced under the new tax regime. This means that taxpayers with an income of up to ₹7 lakhs will not have to pay any tax at all if they opt for the new tax regime. Also, Rs 50,000 standard deduction was introduced under the new tax regime. Therefore, a taxpayer with income up to Rs 7.5 lakhs will pay zero tax if he opts for the new tax regime.
So, upto an annual income of Rs. 7,50,000; the tax applicable would be zero and the income would be absolutely tax-free.
Old Tax Regime vs New Tax Regime:
Navigating the tax terrain requires a personalized approach, as the old tax regime emerges as a sanctuary for high-income earners seeking substantial deductions. Conversely, the new tax regime unfurls as a boon for the less investment-inclined middle-class taxpayers with an income ceiling of Rs 15 lakhs.
For those less inclined towards intricate investment strategies, the New Tax Regime stands as an optimal choice. However, if your financial blueprint involves strategic wealth creation through avenues like tax-saving instruments, mediclaim, life insurance, tuition fee payments, education loan EMIs, home loan commitments, and more, the old regime unveils its advantage. Conducting a meticulous comparative analysis under both tax regimes becomes imperative, ensuring a tailored selection that aligns with individual financial aspirations and circumstances.
Frequency of switching between Old and New Tax Regime:
Income from Business/ Profession – The choice between tax regimes for can only be made once in a lifetime.
Income from Salary or any other head of income attracting TDS – At the start of the financial year, an employee has the choice to select the new tax regime and inform their employer. It cannot be modified during the year. However, the option can be modified when filing the Income Tax Return.
Conclusion:
The changes introduced in the FY 2023-24 tax regime usher in a dynamic landscape, impacting individuals’ tax liabilities and financial planning strategies. Whether to embrace the new tax regime or adhere to the old one requires a careful assessment of one’s income, investment portfolio, and long-term financial goals. This article aims to equip readers with the necessary insights to make informed decisions in navigating the complexities of the revised tax structure.
Author Bio
Why the Government is bent upon promoting NTR is not understood. Betraying the followers of OTR is unjustifiable because they have got long standing commitments such as repayment of Housing Loan, Life Insurance Premium etc., which they cannot stop abruptly.