NewDelhi: As the Indian government continues to implement updates regarding taxation, taxpayers are advised to prepare for the new tax regime (NTR) that will take effect for the financial year 2023-24. Under this new system, individuals who do not select a specific tax scheme will automatically fall under the new tax structure, which features reduced tax slab rates but limits available deductions.
Key Features of the New Tax Regime
The new tax regime allows for lower tax rates, but taxpayers will have to forgo most deductions. For salaried individuals, it is crucial to declare their chosen tax scheme at the beginning of the fiscal year. Once a choice is made, switching between regimes within the same financial year is not permitted.Tax Slab Rates
The new tax regime introduces five income tax slabs, with significant changes compared to the old system. For instance, in the old regime, a 30% tax bracket applies to incomes exceeding ₹10 lakh, while in the new regime, this bracket kicks in at ₹15 lakh.
| Annual Income | Old Tax Rate | New Tax Rate |
|---|---|---|
| Up to ₹3 lakh | 0% | 0% |
| ₹3 lakh – ₹6 lakh | 5% | 5% |
| ₹6 lakh – ₹9 lakh | 10% | 10% |
| ₹9 lakh – ₹12 lakh | 15% | 15% |
| ₹12 lakh – ₹15 lakh | 20% | 20% |
| Above ₹15 lakh | 30% | 30% |
Taxpayers without business income can switch between the old and new regimes annually. However, those with business or professional income cannot switch between the two systems on a yearly basis.
Considerations for Taxpayers
The decision between the old and new tax regimes depends on various factors, including existing investments and which tax bracket a taxpayer falls into. Some may find the old regime more beneficial due to available deductions, while others may prefer the simplicity of the new regime.For example, investments under Section 80C such as PPF and NSC do not qualify for deductions under the new system. Taxpayers can utilise online tax calculators to determine which regime might be more advantageous based on their financial situation.
Switching Between Regimes
If a taxpayer opts for the new tax regime but later wishes to revert to the old system, this is permissible; however, it can only be done once. Salaried individuals are required to pay taxes through TDS (Tax Deducted at Source) each month.As taxpayers prepare for these changes, understanding both systems will be crucial in optimising their tax liabilities.