Income Tax Slabs: Know Current Tax Rates for Individuals Under New and Old Tax Regimes Ahead of Budget 2023

Delhi, January 15: Finance Minister Nirmala Sitharaman will present the Union Budget 2023 on February 1, 2023. The Government of India had in 2020 introduced a new tax regime, without phasing out the old one, wherein taxpayers are allowed to pay taxes at a lower rate, but there is a small catch. The taxpayers are restrained from availing of a number of exemptions which were allowed in the earlier regime. The new income tax regime is optional.

The major difference between the new tax regime and the old tax regime is that the old one allows taxpayers to claim all deductions and exemptions, while the new one does not. However, it is also important to note that the tax rates in the new tax regime are lower, which compensate for the missing exemptions. Union Budget 2023: Amendments to Competition Law Likely in Budget Session

The Old Tax Regime

Tax rates in the old scheme are divided into 3 slabs which may sound on the higher side but the impact can be reduced with the help of allowable deductions and exemptions. Exemptions like House Rent Allowance (HRA) and Leave Travel Allowance (LTA), deductions allow taxpayers to lower their tax amount by investing, saving or spending on specific items. The biggest section for deduction is Section 80C through which taxpayers can bring down their taxable income by Rs 1.5 lakh.  Apart from this, there are several other sections that let you take tax deductions on things ranging from interest on your loans (home and education) to premiums you pay for health insurance.

The New Tax Regime

The new tax regime comes with totally different tax rate slabs without allowable deductions or exemptions. If any taxpayer is unable to make any tax-saving investments then the new tax scheme would definitely be a better choice. Budget 2023: National Real Estate Development Council Seeks Tax Breaks, Infrastructure Status and Push for Rental Housing

Applicable Exemptions Under the New Tax Regime:  

1. Interest received on Post Office Savings Account under Section 10(15)(i) the maximum amount of Rs. 3,500.  
2. Gratuity received from employer up to a maximum amount of Rs. 20 Lacs. 
3. Amount received from Life Insurance Policy on maturity under Section 10(10D). 
4. Employer contribution in NPS or EPF up to 12 per cent of salary and interest on EPF up to 9.5 per cent p.a.  
5. Income from Life Insurance. 
6. Income from agricultural farming. 
7. Standard reduction on rent.  
8. Retrenchment compensation. 
9. Leave encashment on retirement. 
10. VRS proceeds up to Rs 5 lacs. 
11. Retirement cum death benefit.  
12. Money received as a scholarship for education.  
13. Interest and maturity amount of PPF or Sukanya Smriddhi Yojna. 

Old Tax Regime Vs New Tax Regime:

This means individuals opting for the new regime will not get some exemptions which includes Leave Travel Allowance (LTA), House Rent Allowance (HRA), and deductions available including Insurance Premium payout and Savings Account Interest under chapter VI A of the IT Act Section 80.

Taxpayers must note that there is an opportunity for them to choose between the old and new tax regimes to pay their taxes according to their convenience. 

(The above story first appeared on LatestLY on Jan 15, 2023 04:27 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).