Key Changes in New Tax Regime 2023: Tax Slabs, Basic Exemption Limit, Standard Deduction, Read All Details here..

Key Changes in New Tax Regime 2023

Key Changes in New Tax Regime 2023: The year 2023 brought significant alterations to the income tax landscape, courtesy of the Budget 2023 announcements and subsequent updates by the Central Board of Direct Taxes (CBDT). These changes not only influence your current tax year but also cast a shadow over your 2024, especially during the income tax return filing in July. Let’s delve into the key modifications and explore how they’ll shape your financial landscape in 2024.

Revamped Income Tax Slabs in the New Tax Regime 2023

Change: The income tax slabs in the new tax regime underwent a makeover to enhance its appeal.

Impact: These alterations render the new tax regime more attractive, particularly for individuals unable to make tax-saving investments and expenditures in the old tax regime. Those falling into this category often found themselves burdened with higher taxes before the advent of the new tax regime.

Defaulting to the New Tax Regime

Change: As of April 1, 2023, the new tax regime became the default tax regime.

Impact: Come the income tax return filing for FY2023-24 in June/July 2024, choosing the old tax regime requires a specific opt-out. The new tax regime, however, comes with limitations, disallowing common tax deductions and exemptions like HRA and those under sections 80C, 80D, etc. Failure to opt out when the old tax regime suits your tax liability may result in increased income tax outgo.

Boosted Income Tax Rebate in the New Tax Regime

Change: Rebate under section 87A in the new tax regime saw a substantial increase from Rs 12,500 to Rs 25,000.

Impact: Opting for the new tax regime with a taxable income of up to Rs 7 lakh renders you exempt from taxes during income tax return filing. Previously, the rebate under section 87A applied to taxable income up to Rs 5 lakh in the new tax regime. Hence, in 2024, filing ITR for FY2023-24 (AY 2024-25) and opting for the new tax regime with a taxable income not exceeding Rs 7 lakh ensures no tax liability. Note that the same rebate under the old tax regime applies only if taxable income doesn’t exceed Rs 5 lakh.

Increase in Basic Exemption Limit

Change: The basic exemption limit under the new tax regime was raised from Rs 2.5 lakh to Rs 3 lakh.

Impact: Opting for the new tax regime in FY2023-24 makes income tax return filing non-mandatory if your gross taxable income remains below Rs 3 lakh. The elevated basic exemption limit also translates into savings of up to Rs 15,000 (30% of Rs 50,000) for those leaning towards the new tax regime. In contrast, the basic exemption limit in the old tax regime remains Rs 2.5 lakh, making individuals with incomes between Rs 2.5 lakh and Rs 3 lakh potentially better off with the new tax regime.

Standard Deduction of Rs 50,000 in the New Tax Regime

Change: The new tax regime introduces a standard deduction of Rs 50,000 from FY 2023-24 (AY 2024-25).

Impact: Salaried individuals opting for the new tax regime now enjoy two deductions: standard deduction and deduction under section 80CCD (2) for Employer’s contribution to the National Pension System (NPS). With these benefits, those with taxable income up to Rs 7.5 lakh may end up paying zero tax, providing substantial relief. Individuals with an income of Rs 15.5 lakh or more stand to gain Rs 52,500 under the new tax regime.

Marginal Tax Relief for Small Taxpayers in the New Tax Regime

Change: A marginal tax relief is introduced in the new tax regime for individuals with taxable income marginally exceeding Rs 7 lakh.

Impact: Under this provision, individuals opting for the new tax regime during ITR filing can claim marginal relief if the tax on income exceeding Rs 7 lakh is higher than the amount by which the income exceeds Rs 7 lakh. Small taxpayers under the old tax regime, with taxable income exceeding Rs 5 lakh, do not enjoy such relief.

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Key Changes in New Tax Regime 2023: Tax Slabs, Basic Exemption Limit, Standard Deduction, Read All Details here..

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