As our Finance Minister said while presenting union budget 2023 in parliament on 1st February 2023-
“salaried class and the pensioners including family pensioners, for whom I propose to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs. 15.5 lakh or more will thus stand to benefit by Rs.52,500.
We are also making the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime.”
By Budget 2023 Finance Minister took a great initiative To stop bad practices of fake deductions.
The new tax regime for Individual and HUF, introduced by the Finance Act 2020, is now proposed to be the default regime.
It means from Assessment year 2024-25 Individual and HUF have automatically covered under New Tax Regime and if want then they can change their preferences from New to old regime. Any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime. For those person having income under the head “profit and gains of business or profession” and having opted for old regime can revoke that option only once and after that they will continue to be taxed under the new regime. For those not having income under the head “profit and gains of business or profession”, option for old regime may be exercised in each year.
In the other word Assessee can opt New and old regime each year only when they do not have PGBP income. If any Assessee having Income From PGBP once they opt New Tax regime can not eligible to change it from New to Old regime.
Resident individual under the new regime will not pay tax if their total income is up to Rs. 7,00,000. But if total income exceeds Rs. 700000 they need to pay tax as per new Tax slab Rate. i.e. (up to Rs. 300000- NIL), (Rs. 300001 to Rs. 600000- 5%), (Rs. 600001 to Rs. 900000- 10%), (Rs. 900001 to Rs. 1200000- 15%), (Rs. 1200001 to Rs. 1500000- 20%), and (above Rs. 1500000-30%)
Also, Standard deduction of Rs. 50,000 to salaried individual and deduction from family pension up to Rs. 15,000 are proposed to allowed in New Tax regime.
No other changes in New Tax regime under Section 115BAC (i.e allowances, HRA and other deduction are not available)
Example:-
Mr. Modi is a salaried employee and his salary is Rs. 970000.
New Tax regime
He is not required to pay any tax.
Salary income Rs. 9,70,000
less:- Standard deduction Rs. 50,000
Total income Rs. 920,000
Tax Calculation
upto Rs. 300000 NIl
next Rs. 300000 – 5%= Rs. 15000
Next 300000- 10%= Rs. 30000
Next 20000- 15%= Rs. 3000
Total Tax Rs. 48,000
Surcharge 4%=Rs. 1920
Total Tax payable= Rs.49,920
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