Finance Minister Nirmala Sitharaman on Wednesday announced that the New Tax regime will be the default tax system.
Budget 2023: Finance Minister Nirmala Sitharaman on Wednesday announced that the New Tax regime will be the default tax system. The income taxpayers now have to opt for the old regime. The announcement was made during her Budget 2023 speech. FM Sitharaman also proposed to increase the income tax rebate limit to Rs 7 lakh under the new tax regime.
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In the new personal income tax regime, introduced in 2020, the structure has been changed. Finance Minister announced the reduction of the number of slabs to five and increased the tax exemption limit to 3 lakhs.
What is the new tax regime?
The lower tax regime (sans exemptions and deductions) for individuals was introduced in 2020 under Section 115BAC as a simpler alternative, without claiming any investment-related deductions or exemptions. This was expected to prove useful for individuals who were not in a position to invest and claim deductions. The new regime had more slabs than the previous one. However, this regime has not seen many takers so far, as it is considered more complicated.
What is the benefit of new tax regime?
The new tax regime offers the flexibility to the taxpayer to invest their money as they prefer. With the new scheme, there is no obligatory requirement to invest in tax saving schemes and insurance plans which may not be in alignment with their financial goals.
What is difference between new and old tax regime?
Taxpayers with annual income between RS.5 lakhs to Rs.10 lakhs are taxed at 20%, under the old regime. And in the new regime, they will be taxed at half that rate i.e. 10%. Also, those with an annual income of Rs.7.5 lakhs to Rs.10 lakhs will have to pay a 15% income tax.
