What are the changes?
On February 1, 2023, Finance Minister Nirmala Sitharaman presented the Union Budget 2023. The Budget sought to address ongoing challenges and fortify the country for the coming decades. The changes to direct taxation were one of the budget’s main highlights.
The new tax regime has become the de facto standard, and the government has taken five steps to make it more appealing. The old tax regime is still available to taxpayers. The following are the new tax regime slabs for FY 2023-24 (AY 2024-25):
- Up to Rs. 3,00,000: Nil
- 300,000 to Rs. 6,00,000: 5% on income that exceeds Rs 3,00,000
- 6,00,000 to Rs. 900,000: Rs 15,000 + 10% on income more than Rs 6,00,000
- 9,00,000 to Rs. 12,00,000: Rs 45,000 + 15% on income more than Rs 9,00,000
- 12,00,000 to Rs. 1500,000: Rs 90,000 + 20% on income more than Rs 12,00,000
- Above Rs. 15,00,000: Rs 150,000 + 30% on income more than Rs 15,00,00
The new tax regime has supplanted the previous one and is now the standard way of calculating and collecting taxes. It suggests that individuals or businesses are now required to follow the new tax regime’s rules and regulations unless they expressly opt-out and choose a different system. The term “default” implies that the new tax regime is the default option and setting for taxation, and it is applied automatically unless otherwise specified.
Individuals with a net taxable income of up to INR 5 lakh were eligible for income tax exemption under Section 87A under the previous tax regime. However, this limit has been raised to INR 7 lakh in the new budget, but only for those who choose the new tax regime. If you choose the old tax regime, the income tax exemption limit under Section 87A remains at INR 5 lakh.