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In this article Author discusses changes in rates of Income tax proposed in Finance Bill 2023 for A. Y 2024-25 in simplified manner.

One of major change proposed in Union Budget 2023 is that New Tax regime (Sec 115BAC ) is now Default Tax Regime from A, Y 2024-25. Now what do you mean by Default Tax regime. It means in case assessee has not exercised any option, he will automatically shifted to new tax scheme from A. Y 2024-25. So assessee has to decide on or before due date of filling return in case he wishes to opt for old tax regime for A. Y 2024-25.

Further, In case a person having Income from business or profession, has exercised the option of shifting to old tax regime then he has option to shift back to new tax scheme u/s 115BAC (1A) only once in lifetime. In any other case, a person has option to choose new tax regime or old tax regime every year.

Union Budget 2023 Updates Income Tax

Union Budget 2023 Updates Income Tax

In order to better understand new tax rates we all should know tax rates applicable under Old regime and New Regime ( Section 115BAC ) from A. Y 2021-22 to A, Y 2023-24 then only we can compare changes in rate of tax proposed for A, Y 2024-25.

Tax rates applicable under Old Tax Regime for A, Y 2023-24:

Taxable Income Rates of Income Tax
Up to Rs. 250000 Nil
Rs. 250001 to 500000 5 %
Rs. 500001 to 1000000 20 %
Above Rs. 1000000 30%

Tax rates applicable under Old Tax Regime for A, Y 2024-25

Taxable Income Rates of Income Tax
Up to Rs. 250000 Nil
Rs. 250001 to 500000 5 %
Rs. 500001 to 1000000 20 %
Above Rs. 1000000 30%

No change in tax slab rates under old tax regime for A. Y 2023-24 & 2024-25

In case of senior citizen, Basic exemption limit remained same i. e Rs 300000 for A. Y 2023-24 and A. Y 2024-25

Tax rates applicable under New Tax Regime (Section 115BAC ) for A. Y 2023-24:

Taxable Income Rates of Income Tax
Up to Rs. 250000 Nil
Rs. 250001 to 500000 5 %
Rs. 500001 to 750000 10%
Rs. 750001 to 1000000 15%
Rs. 1000001 to 1250000 20 %
Rs. 1250001 to 1500000 25 %
Above Rs. 1500000 30%

Tax rates applicable under New Tax Regime (Section 115 BAC ) for A, Y 2024-25

Taxable Income Rates of Income Tax
Up to Rs 300000 Nil
Rs. 300001 to 600000 5 %
Rs. 600001 to 900000 10 %
Rs. 900001 to 1200000 15%
Rs. 1200001 to 1500000 20%
Above Rs. 1500000 30%

Now let us note down point-wise changes in new tax regime proposed in Union budget 2023 –

1. Basic exemption limit changes from Rs 250000 to Rs 300000 only in case of new tax regime.

2. Tax slab rates reduced from 6 to 5 in New tax regime.

3. Earlier New tax regime applicable only for Individuals and HUF but now New Tax regime applicable for Individuals, HUF, association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person.

4. Rates given in sub-section (1A) of section 115BAC of the Act are the default rates. Further, the income-tax payable in respect of the total income of the person under New tax regime, shall be computed without allowing for any exemption or deduction as provided under clause (i) of subsection (2) of section 115BAC of the Act. However, standard deduction i. e Rs. 50000 as provided under clause (ia) of section 16 of the Act, deduction in respect of income in the nature of family pension i. e. Rs. 15000 as provided under clause (iia) of section 57 of the Act and deduction in respect of the amount paid or deposited in the Agniveer Corpus Fund as proposed to be provided under sub[1]section (2) section 80CCH of the Act, shall be allowed for the purposes of computing the income chargeable to tax under sub-section (1A) of section 115BAC. Earlier these deductions were not allowed.

5. Let take an example – Suppose you have Taxable Income of Rs 1500000 then tax payable under Old Tax regime, Current new tax regime and Proposed tax regime as follows-

Taxable Income after standard deduction -Rs 50000 /deduction u/s 80 C -Rs 150000 Tax under Old Tax regime including cess Tax under Current New Tax regime Tax under Proposed New Tax regime
1500000 210600 195000 145600

So Net Tax benefit Rs 49400 under Proposed New Tax regime for middle class people if opted for New tax regime earlier and Rs 65000 if opted old scheme earlier. But in case you have Taxable income up to Rs 7. 5 lacs then tax payable will be Nil under new proposed scheme, considering standard deduction of Rs 50000.

Hope you have understand —Queries/doubts mailed at mamta0581@gmail. com

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