Answered: 10 FAQs About The New Income Tax Regime's Changes Effective From FY 2023-24

It was three years ago when the government introduced the new income tax regime for individual taxpayers in Budget 2020. Financial Year 2020-21 onwards, individuals had to select between the new and old tax regimes, according to which their income tax for that financial year would be computed.

But in this year¡¯s budget, India's Finance Minister Nirmala Sitharaman announced further changes in the new regime, including changes in tax slabs, rates and more. Moreover, from the newly begun financial year 2023-24, the new tax regime will be considered the default one, instead of the old one.

Further Changes In New Income Tax Regime

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What exactly are the changes introduced in the new tax regime? How it is different from the old tax regime? Read on as we answer some of the most vital questions surrounding the new tax regime.

Also Read: India's Income Tax Department Introduces Calculator To Compare New & Old Regime

1.What are the income tax slabs and tax rates under the revised new tax regime?

As per Budget 2023, the income tax slabs under the new income tax regime will now be as follows (effective April 1, 2023).

Up to Rs 3 lakh: NIL

Rs 3 lakh- Rs 6 lakh: 5%

Rs 6 lakh-Rs 9 lakh: 10%

Rs 9 lakh-Rs 12 lakh: 15%

Rs 12 lakh- Rs 15 lakh: 20%

Over Rs 15 lakh: 30%

2.How much is the basic exemption limit under the revised new tax regime?

As can be seen from the above-mentioned tax slabs, budget 2023 hiked the basic exemption limit to Rs 3 lakh from Rs 2.5 lakh under the new revised tax regime. As far as the old regime is concerned, depending on the taxpayer's age, different basic income exemption levels are present.

The basic income exemption cap is Rs 2.5 lakh for everyone under the age of 60. The basic exemption limit for seniors 60 years of age and older but under 80 years is Rs 3 lakh. And the basic exemption level is Rs. 5 lakh for super elderly citizens who are 80 years of age or older.

3.What are the changes in the revised new tax regime?

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Besides the changes in tax slabs and rates, these are some other changes effective from FY 2023-24 for the revised new tax regime:

-The new tax structure becomes the taxpayers' default option. They do, however, have the option of choosing the old tax structure.

-Under the new tax structure, a standard deduction of Rs 50,000 has been implemented for salaried and pensioners.

-The Section 87A rebate has been increased under the new tax regime for taxable incomes up to Rs 7 lakh. Individuals with taxable income of less than Rs 7 lakh will not have to pay any taxes if they choose the new tax regime in FY 2023-24.

4.Any changes in the old tax regime for FY 2023-24?

No, for FY 2023¨C2024, no changes have been made to the old tax regime's tax slabs, rates and exemptions and deductions applicable.

5.Is the new revised tax regime a default option?

Yes. From FY 2023-24, the new tax regime will be the default option. Every fiscal year, you must select between the old and new tax regimes for that particular financial year.

Also Read: Old Vs New Tax Regime: Which One To Pick?

6.What happens if someone does not specify the tax regime choice?

If a salaried individual does not specify that he or she prefers the old tax regime, their employer will deduct taxes on salary income based on the new tax regime by default, beginning April 1, 2023.

7.Can the tax regime choice be changed?

Once a tax regime has been selected, it cannot be changed within that financial year. However, as per ET, while filing the income tax return, he or she might choose any tax regime, regardless of the tax regime stated by the employer.

8.What deductions are still not allowed in the revised new tax regime, effective April 2023?

Under the revised new tax regime, the individual will still have to forego around 70 deductions and tax exemptions, which includes HRA tax exemption, LTA tax exemption, deduction up to Rs 1.5 lakh under Section 80C. However, a standard deduction of Rs 50,000 has been introduced under the revised new tax regime and thus will be available in both old and new regimes.

9.What all deductions are available under the revised new tax regime?

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With effect from April 1, 2023, an individual can claim a basic deduction of Rs 50,000 (standard deduction) on salary income as well as a deduction under Section 80 CCD (2) of the Income-tax Act of 1961.

The employer's contribution to the Tier-I NPS account can be deducted under Section 80CCD (2). In a particular financial year, the maximum deduction that can be claimed is 10% of basic pay plus dearness allowance (DA). The highest deduction available to government employees is 14% of basic salary plus dearness allowance, the report mentioned.

10.Who cannot switch between the two regimes every year?

As per income tax laws, taxpayers having business income are not eligible to choose between the existing tax regime and the new tax regime every financial year. As per the report, this would imply that salaried individuals and pensioners would be eligible to switch between the new tax regime and the old tax regime at their convenience every financial year provided they don't have business income.