What Is New Tax Regime? Which Tax Regime Is Better? From Tax Slabs to Exemption Limit and Deductions, Key Differences Between the Two Taxation Systems
Taxpayers will now have to decided whether they want to pay income tax as per the new tax regime or the old tax regime.
New Delhi, February 1: Union Finance Minister Nirmala Sitharaman today presented Budget for 2023-24 and announced new tax slabs for those choose to pay income tax under the new tax regime (first introduced in 2020). In her Budget speech, Nirmala Sitharaman also announced to extend the income tax limit to Rs 3 lakh and the tax rebate limit to Rs 7 lakhs in the new tax regime. No changes have been made in the old tax regime.
Taxpayers will now have to decide whether they want to pay income tax as per the new tax regime or the old tax regime. New Income Tax Slabs: Good News for Middle-Class in Budget 2023, No Tax on Income Up to Rs 7 Lakh; Standard Deduction Allowed Under New Tax Regime.
What Is New Tax Regime?
Under the new tax regime, 5% tax would be levied on total income between Rs 3 lakh and Rs 6 lakh, 10% tax would be imposed on income between Rs 6 lakh to Rs 9 lakh, it would be 15% on income between the range of Rs 9 lakh to Rs 12 lakh. On the income range of Rs 12 lakh to Rs 15 lakh, 20% tax would be levied, while tax would be 30% on income slab of Rs 15 lakh and above. Budget 2023 Highlights: From Increase in Income Tax Exemption Limit To Launch of PMKVY 4.0, Here's What FM Nirmala Sitharaman Announced for Various Sectors.
New Income Tax Slabs Under New Tax Regime:
| New Income Tax Slabs | Tax Rate Unde New Tax Regime |
| Up to 3,00,000 | 0% |
| 3,00,001 to 6,00,000 | 5% |
| 6,00,001 to 9,00,000 | 10% |
| 9,00,001 to 12,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Income Tax Rates Under Old Tax Regime:
| Income level (slab) | Old Tax Regime |
| Up to 2,50,000 | 0% |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 7,50,000 | 10% |
| 7,50,001 to 10,00,000 | 15% |
| 10,00,001 to 12,50,000 | 20% |
| 12,50,001 to 15,00,000 | 25% |
| Above 15,00,000 | 30% |
Which Tax Regime Is Better?
While the new tax regime looks lucrative, taxpayers can save more money if they avail existing tax exemptions and deductions in the old tax regime. If your annual salary is Rs 9 lakh and you avail standard deduction of Rs 50,000 and 80C deduction of Rs 1.5 lakh, you will have to pay Rs 52,500 as tax in the old tax regime. Under the new tax regime, an individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000.
However, the old tax regime offers more tax deductions such as 80D (Health Insurance up to Rs 25,000) and interest on home loan under Section 24B (Rs 2,00,000 deduction) and Rs 50,000 under NPS. If a person with annual income up to Rs 9 lakh avails these deductions too, then she or he have to pay zero tax as income tax rebate is available for income up to Rs 5 lakh under old tax regime.
(The above story first appeared on LatestLY on Feb 01, 2023 04:21 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).