New Income Tax Regime FY 23-24
Less TAX(ing) Times Ahead
The New Income Tax Regime was first introduced in Budget 2020 and has since
been running in parallel with the old one. Brought in with the primary
objective of simplifying taxes, the whole idea of simplicity came at a cost
that was too high for a trade-off. No wonder, the
New Tax Regime in its original form, gained little to no traction
in these three years… I had, in one of my older blog posts, critically analyzed
the
New Tax Regime.
You may read it here…
That the New Tax Regime in
its original form had little value to offer was beyond a shadow of a doubt.
However, the need to switch to an efficient tax system that blended Simplicity,
Transparency and Administrative Ease was also long overdue. The New Tax Regime
introduced back in Budget 2020 was definitely a step in the intended direction;
but in terms of real value offered to the tax payer, the regime missed the mark
by a mile. Budget 2023 was therefore, an opportunity to course correct and
better incentivize the adoption of the New Tax Regime… and it did live up to that
expectation.
Budget 2023: The New Tax Regime
gets a Facelift…
Here’s what Budget 2023 had to offer on the income tax front.
- The tax slabs and the applicable rates of the New Tax Regime have been
tweaked to bring down the overall tax liability. The Tax Slabs and the
corresponding rates for the old Regime continue to remain the same.
- Secondly the benefit of Standard Deduction of Rs.50,000/-, which, thus
far was available only to the Old Regime has now been extended to the New
Regime too. This, much desired benefit, further adds to the appeal of the New
Tax Regime and brings it on par with the Old one.
- The third distinctive advantage is the widening of the eligibility net
for availing Rebate u/s 87A, from the existing Rs.5,00,000/- (Net Taxable
Income) to Rs.7,00,000/- (Net Taxable Income). This means that if your Net
Taxable Income is within the defined limit of Rs.7,00,000/- you will be
eligible for a maximum rebate of Rs.25,000/- thereby bringing down your tax
liability to ZERO. Note that the old regime will continue with the existing
eligibility of Rs,5,00,000/- (Net Taxable Income) i.e. a maximum rebate of
Rs.12,500/-.
All of these advantages combined with the twin benefit of simplicity and
convenience make for a strong case to consider switching over to the New Tax
Regime. However, individuals who extensively use existing deductions such as
80C, 80D, 80CCD(1b), 24B, etc. have to carefully consider the impact of these
announcements vis-à-vis the old regime on their final TAX outgo. (It
is recommended that you take the advice of a Qualified Tax Consultant before
arriving at a final decision.)
Budget 2023: Reining in the Old…
Sweetening the New…
By not extending any new benefits to the old tax regime, while
materially enhancing the new one, Budget 2023 seems to have dealt a soft blow
to the old one. A gradual phasing out of the Old Tax Regime now seems pretty much on
the cards.
The New Tax Regime, with a new
lease of life, is definitely here to stay. It appears then… that the times
ahead could be less TAX(ing) for us all…
Note: For readers, keen on knowing more, we will soon
follow this write-up with a post comparing the New Tax Regime and the Old One, specifically
highlighting the estimated tax outgo for various income categories and under
different (deduction) scenarios. Till
then… keep watching this space!
About the author
Deepak Rameshan,
CERTIFIED FINANCIAL PLANNERCM, Dip TD, MMS
Deepak Rameshan, CERTIFIED FINANCIAL PLANNERCM, Dip TD, MMS.
Deepak Rameshan is a CFPCM professional, and has been working in the financial services domain for close to 13 years. He holds a Master’s Degree in Management Studies and a Diploma in Training & Development and has been actively engaged in Training & Content Development during this period. As a Personal Finance Enthusiast and an avid researcher of the subject, Deepak has delivered several Investor Awareness Workshops over the years covering areas such as Risk Planning & Insurance, Retirement & Goal planning, Tax Planning and a few other specialized areas. He takes keen interest in writing and has penned numerous articles for this blog, addressing some of the most relevant concerns that individuals face with respect to their finances.
“Financial Planning Standards Board Ltd. (FPSB Ltd.) is the proprietor of the CFPCM, CERTIFIED FINANCIAL PLANNERCM and marks outside the United States, including in India, and permits qualified individuals to use these marks to indicate that they have met FPSB Ltd.’s initial and ongoing certification requirements.”
Watch this space for more insights on Personal Finance…