New Tax Regime Vs Old Tax Regime For FY24: Even as the new income tax regime has become more attractive for the financial year 2023-24 with a rebate on income up to Rs 7 lakh, about 5.5 crore taxpayers may have shifted to the new tax regime in the current fiscal, according to a Business Standard report quoting a senior government official. It added that most of these taxpayers have a taxable income of up to Rs 7 lakh.
“We don’t see any reason why 55 million won’t shift to the new tax regime. Most young taxpayers, earning around Rs 7.5-8 lakh, or even up to Rs 10 lakh prefer income tax filing to be flexible yet straightforward,” according to the report quoting the official.
In the Budget 2023-24, Financial Minister Nirmala Sitharaman announced income tax relief for individual taxpayers, especially salaried individuals. Though the old tax regime was kept unchanged, the rebate under the new income tax regime was hiked to an income of Rs 7 lakh, compared with Rs 5 lakh earlier. It means those earning up to Rs 7 lakh do not have to pay any tax. Adjusting margin relief, those earning income up to Rs 7.27 lakh crore do not have to pay any tax.
Though an annual income up to Rs 7 lakh is free from tax under the new tax regime, the government has also given a marginal relief of up to Rs 27,000 through a Rs 25,000 rebate under the Finance Act, 2023. It means income of up to Rs 7.27 lakh will be considered the same as Rs 7 lakh for tax purposes and thus will be tax-free.
Many taxpayers were also willing to experiment to determine if the new tax regime was beneficial to them. The official said the taxpayers can go back to the old tax regime in case they find it more beneficial.
The exact number of individuals opting for the new tax regime would only become clear in the next assessment year (2024-25), which would show the earnings and tax obligations for the current financial year.
The income tax department’s FY23 data shows that 4.84 crore taxpayers had a taxable income of up to Rs 5 lakh. More than 1.12 crore people had a taxable income between Rs 5 lakh and Rs 10 lakh, while the number of taxpayers with taxable income between Rs 10 lakh and Rs 20 lakh stood at 47 lakh, according to the report.
The number of taxpayers in the range of Rs 20 lakh-Rs 50 lakh stood at 20 lakh, while there were 3.8 lakh taxpayers with taxable income between Rs 50 lakh and Rs 1 crore.
Similarly, 2.6 lakh taxpayers had taxable income of more than Rs 1 crore.
New Tax Regime Vs Old Tax Regime: FY24 Comparison
Under the new income tax regime, taxpayers earning up Rs 7.27 lakh do not have to pay any tax. However, no deductions shall be claimed under this regime.
Under the old tax regime, income up to Rs 2.5 lakh is exempt. Above this, the slab rates will be applicable. However, deductions like Section 80C, 80D and 80CCD, can be claimed under this. According to tax experts, those earning up to Rs 7 lakh or, in some cases, up to Rs 10 lakh can consider the new tax regime. They said the old tax regime can be attractive if you make use of savings, investments and deductions.
Section 80C relates to basic investments like PPF, EPF, LIC premium and ELSS. 80D relates to the premium on medical insurance. Section 80CCD relates to NPS contribution. Apart from these, there are other Sections CCC, TTA, GG, E, etc, that can also be claimed.