New Income Tax Regime: Ahead of Budget 2023, Know Tax Slabs, Exemptions, Benefits and Disadvantages of Optional Tax Mechanism Introduced in 2020
Finance Minister Nirmala Sitharaman will present the Union Budget 2023 on February 1, 2023. This will be the fifth Budget presentation by Sitharaman, and it will mark the Modi government's last before the Lok Sabha Elections 2024.
Mumbai, January 31: Finance Minister Nirmala Sitharaman will present the Union Budget 2023 on February 1, 2023. This will be the fifth Budget presentation by Sitharaman, and it will mark the Modi government's last before the Lok Sabha Elections 2024. Amid this, one budget that stands out was the Union Budget 2020. It came with many changes, including small changes in the personal income tax regime. Many applauded, while few criticised the Budget 2020-21 as a method of levying taxes changed.
Union Minister Nirmala Sitharaman introduced a new tax regime wherein the tax rates were reduced quite significantly along with a huge reduction in tax-saving opportunities. The new regime restrains the taxpayers from availing of a number of exemptions which they were allowed to in the earlier regime. The new income tax regime is optional. ITR Filing: Know How To File Income Tax Returns Online, A Step-By-Step Guide.
New Tax Regime:
In the new regime, the number of tax slabs has increased, accompanied by a lowering of rates in the sub-Rs. 15 lakh range. All the exemptions and deductions that were being used by taxpayers in the existing regime will not be available in the new regime. Budget 2023: National Real Estate Development Council Seeks Tax Breaks, Infrastructure Status and Push for Rental Housing.
How Different it is from Old Tax Regime?
The old regime has many exemptions and deductions under numerous sections – availing a few of these required people to invest in tax-saving investment options, which helped inculcate a good habit of investing and saving more. The new regime makes things a little complex.
List of Important Exemptions Retained in the New Tax Regime
- Income from Life Insurance,
- Agricultural Income,
- Standard reduction on rent,
- Retrenchment compensation,
- Leave encashment on retirement,
- VRS proceeds up to Rs 5 lakhs,
- Death cum retirement benefit,
- Money received as a scholarship for education, etc.
- Interest received on Post Office Savings Account under Section 10(15)(i) the maximum amount of Rs. 3,500.
- Gratuity received from employer up to a maximum amount of Rs. 20 Lacs.
- Amount received from Life Insurance Policy on maturity under Section 10(10D).
- Employer contribution in NPS or EPF up to 12 percent of salary and interest on EPF up to 9.5 percent p.a.
Disadvantages:
The new regime has many drawbacks, but a few that stands out are - Leave and Travel allowance, House/property rent allowance, Entertainment allowance, and Tax relief on interest paid on home loan for self-occupied or vacant property under section 24.
Old Tax Regime Vs New Tax Regime:
|
Income level (slab) |
Old Tax Regime |
New Tax Regime |
|
Up to 2,50,000 |
0% |
0% |
|
2,50,001 to 5,00,000 |
5% |
5% |
|
5,00,001 to 7,50,000 |
20% |
10% |
|
7,50,001 to 10,00,000 |
20% |
15% |
|
10,00,001 to 12,50,000 |
30% |
20% |
|
12,50,001 to 15,00,000 |
30% |
25% |
|
Above 15,00,000 |
30% |
30% |
The catch of the two tax regimes is that the government has given choice to the taxpayers between the new regime and existing one, leaving it to them to decide which they would like to opt for.
(The above story first appeared on LatestLY on Jan 31, 2023 04:29 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).