The new tax regime is the default system for computing income tax from April 1, 2023.
Under the new system, the exemption limit has been increased from Rs 2.5 lakh to Rs 3 lakh.
Union Budget 2023-24 brought significant changes in personal income tax. These changes have come into effect from the beginning of the new financial year from April 1, 2023. The government has revised the income tax slabs and made the new income tax regime the default for all taxpayers.
Below we’ve listed all the changes you should be aware of.
What are the new changes in income tax slab?
In the new income tax regime, the number of income tax slabs has been reduced from five to six. Under the new system, the exemption limit has also been increased from Rs 2.5 lakh to Rs 3 lakh. This means that taxpayers with annual income up to Rs 3 lakh need not pay any income tax now. The tax rates are 0% for income up to Rs 3 lakh, 5% for income between Rs 3 and 6 lakh, 10% for income between Rs 6 and Rs 9 lakh and so on.
Under the old tax regime, the no-tax slab ranged from Rs 0 to Rs 2.5 lakh. Various deductions can be claimed in the old tax regime under sections 80C, 80D and 80CCD among other sections of the Income Tax Act to reduce the taxable income. However, no deduction is available in the new tax regime.
new and old tax regime
Under the new tax regime, the exemption limit has been increased from Rs 5 lakh to Rs 7 lakh. The exemption is available under section 87A of the Income Tax Act. Now those opting for the new tax regime will not have to pay any tax on annual income up to Rs 7 lakh.
Read also: Income Tax Return Filing Online: Easy Steps To File ITR 1 Seamlessly, Check Details Here
Under the new tax regime, the total tax payable for a person with an annual income of Rs 10 lakh will come to Rs 54,600. The tax liability on an annual income of Rs 15 lakh will be Rs 1,45,600.
The new tax regime is the default system for computing income tax from April 1. But taxpayers will still be allowed to opt for the old tax regime.
In the new tax regime, the peak surcharge will be reduced from 37% to 25%. Therefore, the maximum tax rate with effect from 1 April is 39%. The maximum tax rate was 42.74% till March 31, 2023.
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