Section 115BAC: In this new regime, taxpayers have the OPTION to choose either:
1. To pay income tax at lower rates as per the New Tax regime on the condition that they forgo certain permissible exemptions and deductions available under income tax, Or
2. To continue to pay taxes under the existing tax rates. The assessee can avail of rebates and exemptions by staying in the old regime and paying tax at the existing higher rate.
Income tax slab rate FY 2022-23 (AY 2023-24) – Applicable for New Tax regime:
Slab | New Tax Regime Before Budget 2023 (until 31st March 2023) | New Tax Regime After Budget 2023 (From 1st April 2023) |
₹0 – ₹2,50,000 | – | – |
₹2,50,000 – ₹3,00,000 | 5% | – |
₹3,00,000 – ₹5,00,000 | 5% | 5% |
₹5,00,000 – ₹6,00,000 | 10% | 5% |
₹6,00,000 – ₹7,50,000 | 10% | 10% |
₹7,50,000 – ₹9,00,000 | 15% | 10% |
₹9,00,000 – ₹10,00,000 | 15% | 15% |
₹10,00,000 – ₹12,00,000 | 20% | 15% |
₹12,00,000 – ₹12,50,000 | 20% | 20% |
₹12,50,000 – ₹15,00,000 | 25% | 20% |
₹>₹15,00,000 | 30% | 30% |
List of common Exemptions and deductions “ not allowed” under the New Tax rate regime (From FY 23-24):
1. Leave Travel Allowance (LTA)
2. House Rent Allowance (HRA)
3. Conveyance allowance
4. Daily expenses in the course of employment
5. Relocation allowance
6. Helper allowance
7. Children education allowance
8. Other special allowances [Section 10(14)]
9. Professional tax
10. Interest on housing loan (Section 24)
11. Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2))
List of deductions “allowed” under the new Tax rate regime:
1. Standard deduction on salary
2. Transport allowance for specially-abled people
3. Conveyance allowance for expenditure incurred for travelling to work
4. Investment in Notified Pension Scheme under section 80CCD(2)
5. Deduction for employment of new employees under section 80JJAA
6. Depreciation u/s 32 of the Income-tax act except for additional depreciation.
7. Any allowance for travelling for employment or on transfer.
Let’s understand with the help of an example in the case of Mr X:
Case I:
Gross Total Income = 7,55,000
Standard Deduction = 50,000
Net Total Income = 7,50,000
Tax on Net Income = 25,500
Here, since income increased by Rs 5,000 only, the tax on income increased by Rs 25,500.
So, Marginal Relief shall be available to Mr X = Rs 25,500 – Rs 5,000 = Rs 20,500
Net Tax Payable = Rs 5,000
Case II:
Gross Total Income = 7,77,777
Standard Deduction = 50,000
Net Total Income = 7,27,777
Tax on Net Income = 27,777
Here, since income increased by Rs 27,777
Also, the tax on income increased by Rs 27,777.
So, Marginal Relief shall be available to Mr X = Rs 27,777 – Rs 27,777 = Rs Nil
Net Tax Payable = Rs 27,777.
In case of further clarification, please contact at 7037999666 or mail at pcakg1989@gmail.com