Budget 2023 has still allowed the taxpayers to choose between the New & Old Tax regimes simultaneously but now the New Tax Regime is the default tax regime and if you want to choose the old one, you must submit a declaration to your employer regarding this else the default one will be applicable for you.
- Default Tax Regime: New tax regime has become the default tax regime while one has the option to continue with the old tax regime as well.
- Discourages Investments: Moving towards the new tax regime discourages investments for saving taxes and this will ensure individuals have more money in their hands to spend more and ultimately money returns back to the Govt.
- Standard Deduction: Standard deduction of Rs. 50,000/- has been introduced in the new tax regime for salaried persons like it was earlier in the old tax regime;
- Tax rebate U/S 87A: Tax rebate U/S 87A has been increased up to Rs. 25,000/- in the new tax regime;
- Basic Exemption Limit: The basic exemption limit has been increased to Rs. 3 Lakh from earlier limit of 2.5 Lakh;
- Reduced Tax Slabs: The nex tax regime now has only 5 tax slabs from earlier 7 slabs;
- Rebate Limit: The limit U/S 87A has been increased for income up to Rs. 7 Lakh from earlier limit of Rs. 5 Lakh;
- Leave Encashment Limit: Tax exemption limit for Terminal(Retirement) Leave Encashment at the time of retirement has been enhanced from earlier limit of Rs. 3 Lakh to Rs. 25 Lakh;
- Reduced Surcharge Rate: The surcharge limit has been reduced from 37% to 25% for income above Rs. 5 Crore;
- Lower Tax Rate: Thus, the maximum tax rate has been reduced to 39% from existing 42.74%;
- All these newly introduced benefits have been made keeping in mind the emphasis on the new tax regime.
Old Vs New Tax Regime-Fundamental differences between two tax regimes.
Old Tax Regimes
- It encourages investment in tax saving instruments;
- Existing income tax deductions are allowable;
- Standard Deductions of Rs.50,000/- is allowed for salaried employees;
- Professional Tax Deduction allowed max Rs.2,500/-;
- Benefit of Housing Loan interest payment is allowed U/S 24(b) max Rs.2,00,000/- in a year;
- Only 3 tax slabs — 5%, 20% and 30% are applicable;
- Tax rebate limit is up to Rs. 5 Lakh;
- Maximum Tax Rebate is Rs. 12,500/-;
- Basic exemption limit is Rs.2.50 Lakh
- Deductions under Chapter VIA are allowed
New Tax Regimes
- It discourages investments in tax saving instruments;
- Major existing deductions are disallowed;
- Budget 2023 has introduced Standard Deduction of Rs.50,000/-;
- Professional Tax deductions are not allowed;
- No, housing loan interest benefit is allowed;
- 5 tax slabs — 5%, 10%, 15%, 20% and 30% are applicable;
- Tax rebate limit is up to Rs. 7 Lakh;
- Maximum Tax Rebate is Rs. 25,000/-;
- Basic exemption limit is Rs.3 Lakh;
- No deductions under Chapter VIA are allowed except Employer’s contribution to NPS and newly introduced Agniveer deduction.
New Income Tax Slab for FY 2023-24 (AY 2024-25) as per the New Tax Regime
New Income Tax Slab for FY 2023-24 (AY 2024-25) as per the New Tax Regime
| Net Income Tax Slabs as per New Tax Regime | Income Tax Rates- FY 2023-24 & AY 2024-25 |
| Up to Rs. 3,00,000 | – |
| Rs. 3,00,001 to Rs. 6,00,000 | 5% |
| Rs. 6,00,001 to Rs. 9,00,000 | 10% |
| Rs. 9,00,001 to Rs. 12,00,000 | 15% |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
