Challenges and Opportunities for Taxpayers under the New Tax Slabs

The Indian Budget 2023 has been the talk of the town across industries since its declaration. Besides the various schemes, several income tax slabs and rebate limits have baffled employees. Every worker ponders one question today: "What does the new tax slab 2023 hold for me?" Are you, too, curious about the opportunities and challenges of the new tax slab? Stay tuned to learn more.

New Regime Tax Slab: What Are These?

The 2023 budget changed the income tax slabs, introducing several rebates and relief. These changes, been proclaimed more beneficial to taxpayers, came into effect on April 1, 2023.

Further, the new tax slab is also said to be the default tax regime unless an individual opts for the old regime. Under this, Taxpayers earning less than INR 7 lakhs are exempt from paying tax. Moreover, the new tax regime comprises just five tax slabs, compared to 6 previously.

Features of New Tax Slab Regime

Some features of the new regime tax slab are:

• Unlike the old tax regime, which charged 30% for income above INR 10 lakh, the new regime only charges 20% for income between 12 to 15 lakh.
• The new regime charges only INR 8,400 for income in the range of INR 10-30 lakh, in contrast to the existing rule, which sets INR 78,600 for the same income range.
• The new system does not mandate investments in insurance and tax-saving plans, which may contradict an individual's long-term financial objectives.
• There is no need to make investments to claim exemptions if your income is less than INR 7 lakhs, and your entire income will be tax-free irrespective of your investments.
• Taxable income exceeding INR 15.5 lakhs under the new system is eligible for a standard deduction of INR 52,500.

Challenges of Opting for the New Tax Slab 2023

While the new regime offers measurable benefits, taxpayers must note certain exemptions they must undergo. These deductions and exemptions are

• Salaried employees must forego the leave travel allowance in the new tax regime.
• The house rental allowance.
• Taxpayers cannot avail of the deductions under Section 80TTA/80TTB for interest in savings accounts and Section 80TTB for interest on deposits to senior citizens.
• Government employees' deductions for entertainment allowance and employment/professional tax under Section 16 will not be available.
• Tax benefits previously availed under Section 24 for interest paid on a housing loan for self-occupied or vacant house property.

Conclusion

Comprehending income tax slabs and deductions can be a great challenge for taxpayers. Moreover, employees across sectors have yet to fully understand the new tax slab 2023. This is due to a lack of proper awareness, leading to uncertainty about their best tax regime.

When analysing the effects of the new tax regime, it is necessary to consider both the advantages, such as the tax exemption of up to INR 7 Lakhs, and the limitations, such as the lack of certain exemptions. And often, employees find it challenging to computer their finances.

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Frequently Asked Questions

1. In which case new tax regime is beneficial?

You may benefit more in the new tax regime if your income is INR 7 Lakhs. Also, opting for the new regime would be advantageous if the sum of deductions is INR 1.5 lakhs or lower.

2. Which tax regime is better for 12 lakhs?

It is wiser to opt for the new tax regime if you have invested less than Rs 3,00,000 in tax-saving schemes; otherwise, the old regime would be more beneficial.