The Union Budget 2023-24 has introduced the new tax regime for individual taxpayers from February 1, 2023. The new tax regime introduces six tax slabs with different tax rates.
The new tax regime slabs are:
- Between Rs 0-3 lakh: no tax
- Between Rs 3-6 lakh: taxed at 5%
- Between Rs 6-9 lakh: taxed at 10%
- Between Rs 9-12 lakh: taxed at 15%
- Between Rs 12-15 lakh: taxed at 20%
- Above Rs 15 lakh: taxed at 30%
The old tax regime slabs are:
- Between Rs 0-2.5lakh: no tax
- Between Rs 2.5-5lakh: taxed at 5%
- Between Rs 5-10lakh: taxed at 20%
- Above Rs 10 lakh: taxed at 30%
However, the new tax regime is a default scheme. An individual taxpayer still has the option to choose between the old and the new tax regime. In case a taxpayer fails to make a choice, they will fall under the ambit of the new tax regime automatically.
A key difference between the old and the new tax regime is that the new regime eliminates quite a few tax exemptions and deductions. This includes deductions and allowances such as the standard deduction, transportation allowance, and the entertainment allowance.
However, a few exemptions and deductions, such as those for house rent, medical expenses, and charitable donations, have not been changed.
The government, on its part, has promised to compensate for this rise by reducing the tax rates.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.