Did your yearly income just become taxable? Then it's time to pay taxes and understand the new regime income tax details. You have to pay according to the income tax slab you belong to, based on annual income.
In the new system, the tax slabs have become more convenient. Moreover, you can switch between the old and new regimes if required. We will look at all such changes and regulations of the new regime in today’s post.
If you have been bothered by the question, what is new tax regime, we’re here to help. The primary highlight of the new regime tax is the streamlined tax slabs and revamped tax rates. These changes were introduced to support taxpayers, especially those with low annual incomes.
Under the new system, citizens with a yearly income of around ₹3 lakhs do not have to pay taxes. This was a significant modification from the old regime, where the lowest tax slab was ₹2.5 lakh. Let's look at the basic tax exemptions and slabs.
As you can understand, the taxation system will be ideal for many middle-class families.
Another important advantage of the new regime is the improved tax rebate facility. You can receive a complete text rebate if you have an income of ₹7 lakh per annum. This limit was ₹5 lakh previously, so the modification benefited several citizens.
In addition, applying for a standard deduction of ₹50,000 with a rebate is also possible. If you have a tax-saving mindset, the rule can be an effective step towards it.
The deductions and exemptions in the old tax regime do not apply to the new taxation system. So the government has excluded approximately 70 deductions, which include House Rent Allowance, Leave Travel Allowance and helper allowance.
However, the following deductions apply to the new regime –
The list doesn’t end here, as there are other applicable deductions under the regime.
If you're receiving a family pension, you're eligible to get a deduction of ₹15,000 or 1/3rd of the pension amount. So, depending on the pension income, you can pay less taxes.
In addition, the surcharge rates for high-income citizens are also changed. If you earn more than 5 crores yearly, you must pay a 25% surcharge. This was 37% in the old regime.
The government has declared the new system as the default option, effective from FY 2023-24. Still, you can switch between the old and new regimes when needed. You need to submit form 10IE while selecting between old or new tax regimes.
Further, you must submit form 10IE before your income tax return filling. So, this offers great flexibility for individuals to manage their tax payments. Based on the tax slabs you fall under, you can switch between regimes.
The new income tax regime introduced by the government has brought about significant changes in the taxation system, with more streamlined tax slabs and revamped rates to support taxpayers, especially those with low annual incomes. The new system offers improved tax rebate facilities and applicable exemptions and deductions, including deductions for Notified Pension Scheme Investments, professional travel conveyance allowance, and deductions under section 32. Shifting between old and new regimes is also possible, offering great flexibility for individuals to manage their tax payments.
In addition to understanding the new income tax regime, it's essential to have a proper understanding of your finances to make the most of your money. With Fi's AI-powered Analyser, you can track your expenses, analyse your spends by merchants, brands, categories, and time. Fi also provides thoughtful nudges to help you maximise your savings and investments, and you can even check your credit score using the Insights Hub on the Analyser. With over 2.5 million people trusting Fi to get a 360-degree view of their money, it's worth considering using their money management platform to Know Your Money & Grow Your Money.
The new tax regime has flexible tax slabs, deductions and lower surcharge rates to support all individuals.
If your salary is between 1-3 lakh and you want to avoid taxes, select the new regime. Plus, family pensioners looking for excellent deductions will find the new system useful.
