New Tax Regime: Finance Minister Nirmala Sitharaman proposed a significant change to the new tax structure in the Union Budget 2023 to promote more adoption. These modifications will take effect from the financial year 2023–2024.
India introduced a new tax regime in the Union Budget 2020 that offers lower tax rates to individuals who are willing to forego certain exemptions and deductions. This new regime is optional till FY 2022-23, later taxpayers can choose to stay with the old regime as the new regime will be default from April 01, 2023.
Under the new tax regime, taxpayers can avail lower tax rates if they are willing to forego exemptions and deductions such as House Rent Allowance (HRA), Leave Travel Concession (LTC), and others.
The tax rates under the new regime are as follows:
For individuals with income up to-
- Rs. 3 lakhs: No tax
- Rs. 3 lakhs and Rs. 6 lakhs: 5% tax
- Rs. 6 lakhs and Rs. 9 lakhs: 10% tax
- Rs. 9 lakhs and Rs. 12 lakhs: 15% tax
- Rs. 12 lakhs and Rs. 15 lakhs: 20% tax
- Above Rs. 15 lakhs: 30% tax
It is important to note that if a taxpayer chooses the new tax regime, they will not be able to claim deductions such as Section 80C, Section 80D, and others.
Exemptions In New Tax Regime 2023-24
The tax slabs have undergone restructuring, and the new tax regime will be made the default system for everyone from next fiscal. The new tax system featured a reduced tax rate, there were no exemptions available.
In practice, the new tax regime will be the default choice for all taxpayers beginning in FY24, and taxpayers who opt for the old tax regime have to mention their preference.
The tax-free limit has now been raised to Rs 7 lakh.
Standard Deduction
A salaried taxpayer can claim up to Rs 50,000 for the standard deduction. If you are a family pensioner, then under the new tax regime you can claim a standard deduction of Rs 15,000.
Income for a family pensioner is taxed under the head ‘Income from other sources.’
NPS Contribution by Employer
If your employer is contributing to your NPS account, then as a salaried employee you are eligible to claim a deduction for the contribution made from gross income. This deduction is claimed under Section 80CCD (2) of the Income-tax Act, 1961.
Section 80CCD(2) allows for a maximum deduction of 10% of the pay (Basic + DA).
Agniveer Corpus Fund
In the Budget Speech, the finance minister announced that any amount paid or deposited to the Agniveer Corpus Fund under the newly proposed section 80CCH of the Income-tax Act can be claimed as a deduction from income by the Agniveer.
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