The budget for 2023-24 added some much-needed respite for taxpayers in the country. The annual budget 2023 made significant changes to the country's tax structure. While the old tax regime has remained the same, the new tax regime has been enhanced with some attractive benefits.
Plus, the government has provided taxpayers with the option to either stick to the old regime or choose the new tax structure. But the choice can be difficult, especially if you are unaware of the changes added to the new tax regime. Read further as we decode the new tax regime and help you better understand the alterations.
One of the highlights of budget 2023 – 24 was the overhaul of the new taxation structure for individuals and corporations. Compared to the old regime, the new tax structure incorporated several benefits for salaried individuals. Additionally, you might notice that the income tax slabs for the new regime have six brackets, compared to five in the old structure.
Here is a breakdown of the income brackets for the new tax regime:
The biggest change is that individuals with income below INR 3 lakh per annum are exempt from taxation. The old regime only granted this relief for income levels below INR 2.5 lakh per annum.
Plus, the following features were added to the new regime:
Standard deductions are still functional in the new regime, including travelling allowance, investments made in the National Pension Scheme (NPS), and other deductions under section 32 of the act.
The Government of India highlighted two options for taxpayers in budget 2023-24 – you can either enjoy lower tax rates with the new regime or take advantage of deductions of the old regime, albeit with higher taxes.
You have to explicitly choose the old tax regime while filing your ITR if you want to follow its structure. Failure to do so will mean that you consent to the new structure. You will be required to pay according to the new income tax slabs. But you can change it again the following year if the regime does not appeal to you.
Plus, the new regime is more beneficial if your income falls under INR 7 lakhs. The old structure only provides exemptions for income up to INR 5 lakhs. Hence, the new system will help you save bigger and leave you with more disposable income.
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According to Section 24, you can claim a deduction of a maximum of INR 2 lakhs on home loans if you and your family are residing in the property. If the same property is on rent, you can get the entire interest waived off as a deduction.
No changes have been communicated for the old tax regime in Budget 2023. The only difference is that you must declare that you are choosing the old regime during ITR filing to avoid getting taxed under the new system.
