What is New Tax Regime?
The New Tax regime is a optional income tax frame work. In the year 2020, the government adopted a new regime that has more tax-saving options but with higher tax rates. The new regime also offers the option of selecting either old or new regimes to taxpayers, which renders the taxation process even more complicated. When deciding what option to go for, you must try approaching it in a systematic manner to avoid unnecessary hassles in figuring it out.
- Estimate all the exemptions accessible.
- Look at all the deductions you can make a claim on
Correspondingly, every taxpayer will relish different tax benefits under the two regimes of taxation. Taxpayers need to be cautious of prioritizing regimes over life goals. For example, you need to decide whether to invest your capital or go for securities or insurance, depending upon your requirements.
The new regime, introduced lately, is different from the old one in two aspects. First, the new regime entails more tax slabs which are accompanied by reduced rates in the sub-Rs Fifteen lakh range. And second, all the deductions and exemptions that were utilized by taxpayers in the current regime shall not be accessible in the new taxation regime.
If a person chooses a new regime, deductions offered in the old regime are not made available. Thus, experts recommend that if the benefit of lower rates outpaces the perks of deductions and exemptions available under the old regime, then the taxpayer should go for the new regime.
Purpose of New Tax Regime
The new tax regime aims to streamline the tax structure and reduce the compliance burden on taxpayers. It encourages taxpayers to invest without worrying about tax-saving options and to enjoy a lower tax rate in exchange for giving up certain exemptions and deductions.
New Income Tax Slabs for FY 23-24
Here are the revised income tax slabs under the new regime:
Key Highlights of Income Tax under the Union Budget
- Tax Rebate: The income tax rebate limit has been increased from Rs 5 Lakh to Rs7 Lakh in the new regime
- Revised tax slabs: The tax slab under the new regime is increased to Rs3Lakhs
- SURCHARGE RATE: The highest surcharge has been reduced from 37% to 25% under new regime
- Default Tax Regime: The taxpayers can choose to use the benefit of the old regime. However, the new regime will be the default regime now
- Standard deduction: The salaried employees earning 15.5 Lakh or more shall get standard deduction benefit of 52.500
- Processing time: Average processing period for income tax return reduced from 93 days to 16 days
- Tax exemption: The tax exemption on leave encashment increased to 25 Lakhs from 3 Lakhs for non-government salaried employees
