Old or new tax regime – What is useful for you as per Budget 2023 | With Auto Calculate Income Tax Preparation Software in Excel for the Non-Govt Employees for the F.Y.2023-24
Old or new tax regime – What is useful for you as per Budget 2023 | Finance Minister Nirmala Sitharaman presented the last complete budget of the Modi government ahead of next year’s parliamentary elections, scheduled for April-May 2024. The cost of living has increased in recent years, which has increased inflationary pressures. The Union Budget 2023 can add more value to taxpayers by providing them with tax benefits and increasing tax deductions to increase their purchasing power (cash on hand) and revitalize the Indian economy.
This year’s Union Budget announcements focused on pro-growth measures with special promotion on infrastructure, unlocking potential, green growth, youth empowerment, and inclusive development. The budget aims to sustain India’s growth in the 2023-2024 financial year despite the global economic slowdown.
Finance Minister Ms. Nirmala Sitharaman’s budget speech for 2023 Old or new tax regime – What is useful for you as per Budget 2023, was her fifth consecutive budget speech, which contains several proposals for the benefit of taxpayers in the lower and higher tax brackets. No income tax announcements were made in the 2022 budget; however, in the new budget, 5 announcements were made regarding personal income tax.
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Under the new tax regime (introduced in the 2020 budget), the base exemption threshold has been increased to Rs 3 lacs, up from the previous Rs 2.5 lacs
In an attempt to make the new tax regime more taxpayer-friendly, the basic exemption threshold, which was Rs 2.5 lacs, was increased to Rs 3 lacs. This applies to taxpayers in all age groups. A person earning annual income < Rs 3 lacs is exempt from paying taxes under the new tax regime only.
In addition, the government also announced changes in the income tax rates for individuals opting for the new tax regime, with the number of tax brackets being reduced from 6 to 5. The new regime will be the default tax regime; however, the former has not ceased, and taxpayers can also continue to use them.
The Section 87A rebate has been increased from the current Rs 5 lacs to Rs 7 lacs under the new tax
Currently, those with incomes of up to 5 lacs do not pay any income tax and are allowed a maximum refund of up to Rs 12,500 as per Section 87A of the Income Tax Act.
Old or new tax regime – What is useful for you as per Budget 2023 | As per the budget proposal, there is an increase in rebate and people earning up to Rs 7 lakh will not have to pay tax under New Regime.
Proposal to extend the benefit of the normal exemption in the new Tax Regime to salaried classes and pensioners, including family pensioners
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The standard deduction is the untaxed amount beyond the base exemption threshold. Currently, the standard deduction is Rs 50,000 under the old regime, and the maximum deduction for business tax is Rs 2,500. As per the 2023 Budget, the Minister of Finance said that each salaried person with an income of Rs 15.5 lacs or more would benefit from an additional Rs 52,500 in terms of tax savings.
Which tax regime should you choose after the Budget 2023 announcements?
Let’s think through an example to see which tax regime would be beneficial to you and give you the best ideas on which one to choose:
A person’s taxable income is determined after deducting various deductions under Chapter VI A of the Income Tax Act 1961. i.e. Section 80C to 80U deductions on Gross Gross Income (GTI).
In the example given, we calculate taxable income after taking into account commonly used deductions such as Standard Deduction u/s 16, Child Care Allowance u/s 10(14), and Business Tax u/s 16(iii). ), Mediclaim u/s 80D, Home loan interest under 24(b), Vacation Travel Allowance u/s 10(5), Meal allowance deduction, NPS waiver, and other benefits under section 80C.
As you can see, there is a big difference when you choose the new tax regime for flexible rates versus the old tax regime. However, please note that the new Tax Regime aims to provide relief to taxpayers, but does not allow for the main deductions and exemptions available under the old tax regime. Therefore, the choice between the Old and New Income Tax Regimes will be entirely case-by-case.
As an appraiser, you have the option to choose between the Old Tax Regime and the New Tax Regime while cheating your ITR for the year. Your decision to choose the most appropriate tax regime should be based on a number of factors, such as your current income level, income structure, exemptions, allowances to which you are entitled, etc.
As a result, tax benefits were adjusted in the 2023 Union Budget to encourage people to migrate to the new tax regime, which has not had much traction since it was introduced in the 2020-2020 financial year.
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