Under the new tax regime, the tax rates are significantly lower, though the benefit of various exemptions and deductions (other than standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension) is not available, as in the old regime.
Changes announced in the new tax regime in Budget 2023
Thus, unless an individual specifically opts for the old tax regime, their incomes will be taxed at the new tax regime’s slabs and rates. Rebate under Section 87A increased to taxable income of Rs 7 lakh (tax rebate of 25,000) from 5 lakh (tax rebate of Rs 12,500).
The difference between the new and old tax regimes typically revolves around the available deductions and tax rates. In the new tax regime, there are lower tax rates but fewer deductions and exemptions, while the old tax regime offers more deductions and exemptions but at higher tax rates. It often depends on individual circumstances and financial goals as to which regime is more advantageous.
Here’s a comparison table between the old and new tax regimes:
| Aspect | Old Tax Regime | New Tax Regime |
|---|---|---|
| Tax Rates | Higher tax rates | Lower tax rates |
| Deductions | Various deductions and exemptions available | Limited deductions and exemptions |
| Standard Deduction | Available | Not available |
| Tax Slabs | Multiple tax slabs with increasing rates | Fewer tax slabs with lower rates |
| Investment Options | Tax-saving investments like PPF, ELSS, etc. | Limited investment options for tax deductions |
| Tax Planning | More opportunities for tax planning | Simplified tax structure with less tax planning |
| Simplicity | More complex tax filing process | Simpler tax filing process |
| Flexibility | Offers flexibility through deductions and exemptions | Offers less flexibility but simpler structure |
This table provides a basic overview of the key differences between the old and new tax regimes. Keep in mind that the suitability of each regime depends on individual financial situations and goals.
