How will the New Income Tax Regime impact you in FY 2023-24? | Union Budget 2023 | Personal Finance

In the Budget 2023, the government of India announced key major changes for hard-working middle-class citizens to reduce tax burden. But these changes are only made under the new tax regime. The old tax regime still continues as is.  

So, what’s different in the new tax regime for FY 2023-24?  

1. The basic exemption limit has been increased to 3 lakhs from 2.5 lakh.  

2. The maximum limit of rebate under section 87A has increased to Rs 25,000 from Rs 12,500. That means, individuals whose taxable income does not exceed Rs 7 lakh in a financial year, will not have to pay any tax.  

3. The new tax slabs under the new regime -  

Up to Rs.3 lakh - Nil
Above Rs.3 lakh - Rs.6 lakh - 5% of the total income
Above Rs.6 lakh - Rs.9 lakh - 10% of the total income
Above Rs.9 lakh - Rs.12 lakh - 15% of the total income
Above Rs.12 lakh - Rs.15 lakh - 20% of the total income
Above Rs.15 lakh - 30% of the total income

4. If you’re a salaried individual, you will get a benefit of additional Rs 50,000 as ‘Standard deduction’. This deduction has been extended to the new income tax regime. Prior to Budget 2023, it used to be only in the old  tax regime.  

Furthermore, the Budget 2023 has made an amendment under the income tax laws to provide marginal relief to small taxpayers whose taxable income exceeds RS 7 lakh, provided they opt for the new income tax regime.

Let’s take an example. Suppose your total income chargeable to tax under the new tax regime for FY 2023-24 is Rs 7,05,000.  

Now tax under the new regime (including cess) for the year would be Rs 26,520/- but the additional income is only Rs 5000.  

So, as per the announcement, you will be eligible for a marginal tax relief of Rs 21,520 (26520-5000).  And, you will only pay a tax of Rs 5,000 (including cess) with this marginal tax relief and save taxes of Rs 21,520.  

This tax relief is likely to benefit you under new tax regime whose taxable income (after claiming eligible deductions) is between Rs 7 lakh and Rs 7.5 lakh

However, you have the option to choose between the old and new tax regime. For those who don't choose between the two, the new tax regime will become a default tax regime. So, use tax calculators, and make a choice that will help you pay optimal taxes.  

Time stamps -

0:00 How new income tax regime will impact you in FY 2023-24?
0:37 New Basic Exemption Limit Increase under the new tax regime
0:44 New Income Tax Slabs under the new tax regime
1:13 Rebate u/s 87A Increase under the new tax regime
1:30 Marginal Tax relief extended to Individuals with Income up to Rs 7 lakh
2:52 New tax regime will be the default regime

Read more here - https://www.bankbazaar.com/tax/income...

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