Tax Regime | Meaning and Definition

What is a Tax Regime?

The Tax regime elaborates tax rates and tax slabs. 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.

New Income Tax Slabs for FY 23-24

Here are the revised income tax slabs under the new regime:  

₹7 Lakh 33,800 0 33,800
₹8 Lakh 46,000 35,000 11,600
₹9 Lakh 62,400 45,000 17,400
₹10 Lakh 78,000 60,000 18,000
₹12 Lakh 1,19,600 90,000 26,900
₹15 Lakh 1,95,000 1,50,000 45,000

Key Highlights of Income Tax under the Union Budget 2023

  • 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

Frequently Asked Questions(FAQs)

There is no shortcut to answer this question, as taxpayer has to evaluate both the regimes new and old and then decide which one to choose. But keeping in mind about the investment in tax saving instruments, it’s recommended to opt for old tax regime as it offers deduction/exemption.

In order to opt for new regime, individuals with business income have to fill form 10E once in lifetime. Salaried individuals have to fill this form every year.

Businessman, employees, members of HUF who are eligible to pay Income tax must opt for regime whether old or new.

The old regime would be more beneficial if you have invested more than 3,00,000 in tax saving schemes.

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