New Income Tax Regime – Salaried Employees

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CBDT vide circular No. 04 dated 05 April 2023 clarified that the employer shall seek information from each of its employees regarding his intended tax regime and each such employee shall intimate the same to the employer.
The new tax regime has been selected as a default option for all taxpayers from FY 2023-24 onwards, and taxpayers who want to opt for the old tax regime will now have to specifically indicate this preference. The employees are confused as to which regime; they should opt for.  It becomes cumbersome for them to pick the best-suited tax regime.

Salient Features of New Tax Regime:

The introduction of the new tax regime was made vide Finance Act, 2020 applicable from 1st April 2020 under section 115BAC for individual and Hindu Undivided Family (HUF). The compulsory requirement of foregoing specified deductions for opting for the new regime has somewhat, made the said new regime unpopular and with very few takers. A wide range of reliefs have been introduced to the new tax regime vide Finance Act 2023 to make it more attractive and shift the direction towards this regime. 2.1 The new tax regime has rationalized the scope of taxation with five tax slab rates ranging from 0% to 30% with the basic exemption till Rs. 3 lakhs exempt from tax and the highest tax rate of 30% applicable on income above Rs.  15 lakhs.

The new tax regime has the benefit of the standard deduction and there is a full rebate provided to individuals earning up to Rs. 7 lakhs annually U/S 87A. An individual having total taxable income up to Rs. 7 lakhs will get the tax benefit of Rs 25000 or the amount of tax payable (whichever is lower).
Senior citizens above 60 years and up to 80 years of age are eligible to claim a rebate under Section 87A but super senior citizens with age above 80 years are not eligible to claim the rebate

SlabNew Tax Regime
Before Budget 2023
(until 31st March 2023)
New Tax Regime
After Budget 2023
(From 1st April 2023)
₹0 – ₹2,50,000
₹2,50,000 – ₹3,00,0005%
₹3,00,000 – ₹5,00,0005%5%
₹5,00,000 – ₹6,00,00010%5%
₹6,00,000 – ₹7,50,00010%10%
₹7,50,000 – ₹9,00,00015%10%
₹9,00,000 – ₹10,00,00015%15%
₹10,00,000 – ₹12,00,00020%15%
₹12,00,000 – ₹12,50,00020%20%
₹12,50,000 – ₹15,00,00025%20%
>₹15,00,00030%30%
  • Please note that the tax rates in the New tax regime is the same for all categories of Individuals, i.e. Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years , and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.
  • In Budget 2023, rebate under new regime has been increased and therefore, income upto Rs 7 lakh will be tax-free.

Income Tax Calculator: The Income tax department has launched a new tax calculator to help taxpayers decide which income tax regime will be better for the assessee for the upcoming financial year 2023-24.
https://incometaxindia.gov.in/Pages/tools/115bac-tax-calculator-finance-bill-2023.aspx.

Available Deductions & Exemptions:

(a)The new tax regime permits a standard deduction of Rs. 50,000 for salaried persons and a deduction for a family pension being lower of Rs. 15,000 or 1/3rd of the pension

(b)Transport Allowance in case of an especially abled person.

(c) Interest on a home loan on Let out Property

(d) Deduction for employer’s contribution to NPS Account [(Sec 80CCD (2))

(e) Exemption on Leave encashment, Gratuity & Voluntary Retirement.

(f)Conveyance Allowances/reimbursement towards the use of a vehicle for official purposes.

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