The New Tax Regime was made the default option for all taxpayers in Union Budget 2023, including individuals, Hindu Undivided Families (HUFs), and Association of Persons (AOPs).
New Tax regime in ITR 2024: In the Union Budget 2023, Finance Minister Nirmala Sitharaman declared that the new income tax regime will be the default one starting from April 1, 2023. However, the minister said that taxpayers can still avail of the old regime. The new tax regime, which was introduced in the Union Budget 2020, was made the default option for all taxpayers, including individuals, Hindu Undivided Families (HUFs), and Association of Persons (AOPs).
The new tax regime, wherein the tax slabs were altered and were a bit different from the old tax regime, offered concessional tax rates.
Here are a few top points to consider while choosing the new tax regime:
> Income Tax Rebate: Before the Union Budget 2023, individuals with an annual income up to Rs 5 lakh were not required to pay any tax. This limit was hiked to Rs 7 lakh.
> Standard deduction under New Tax Regime: The standard deduction of Rs 50,000, which was earlier restricted to the Old Tax Regime, was extended to the new tax regime in Union Budget 2023. Following the inclusion, the tax-free income, including the rebate, now stands at Rs 7.5 lakh.
> Revised tax slabs: A major difference between the Old Tax Regime and the New Tax Regime is that the latter offers lower tax rates. The government announced new income tax slabs in its 2023 Budget. The new tax regime offers a higher threshold for tax relief, broader tax slabs and reduced tax rates.
Here’s the revised tax slabs introduced in the Union Budget 2023
TAX TABLE
Zero tax on income up to Rs 3 lakh
5% between Rs 3 lakh and Rs 6 lakh
10% on Rs 6 lakh to Rs 9 lakh
15% on Rs 9 lakh to Rs 12 lakh
20% on Rs 12-15 lakh
30% on Rs 15 lakh
> Reduced Surcharge for High Net Worth Individuals: FM Sitharaman reduced the surcharge rate on income over Rs 5 crores has been reduced from 37% to 25%. This move brought down the effective tax rate from 42.74% to 39%. This was introduced only under the New Tax Regime.
Before this, the surcharge (the tax on tax for those with income exceeding Rs 5 crore) was 37% of the tax amount under both the Old and New Tax regimes. This pushed the highest marginal tax rate (including surcharge) to 42.74%, which is the highest tax rate levied in the last three decades.
Surcharge Rates for Individual/HUF/AOP/BOI/ Artificial Judicial Person
| Net Taxable Income limit | Surcharge Rate on the amount of income tax |
| Less than Rs 50 lakhs | Nil |
| More than Rs 50 lakhs ≤ Rs 1 Crore | 10% |
| More than Rs 1 Crore ≤ Rs 2 Crore | 15% |
| More than Rs 2 Crore ≤ Rs 5 Crore | 25% |
| More than Rs 5 Crore | 37% |
> Higher Leave Encashment Exemption: Citing a general salary increase, FM Sitharaman increased the leave encashment amount claimed as exemption increased to Rs 25 lakh from Rs 3 lakh for non-government employees, which is almost an 8-fold increase.
Both the old and new tax regimes possess advantages and disadvantages. One should note that the New Tax System doesn’t offer certain exemptions and deductions, such as HRA, LTA, 80C, 80D and more. The New Income Tax Regime is apt for those who prefer minimal deductions or wish to avoid the burden of extensive tax preparation.
On the other hand, the Old Tax Regime is fit for those who have investments in tax-saving instruments and have a habit of saving.
Source: https://www.businesstoday.in/personal-finance/tax/story/income-tax-returns-2024-top-5-points-to-note-while-selecting-new-tax-regime-for-fy2024-25-411235-2023-12-29
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