New Tax Regime vs. Old Tax Regime, What the Union Budget 2023 Has in Store for the Taxpayers
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On 1 February, Finance Minister - Nirmala Sitharaman said that effective from 1 April 2023, the new income tax regime will become the default one. There was a set of changes announced for taxpayers, making the new tax regime more attractive than what it was when first announced in 2020. Those who wish to opt for the new tax structure, need to opt out of the old one. But you can continue with the old tax regime if you want to.
The FM said that no tax will apply on an annual income up to Rs. 7 lakhs. But this facility is only for the new tax structure. The move will increase the rebate and bring some relief to resident individuals. There will be only 5 slabs under the personal income tax structure. Yet, the old tax regime will keep attracting people because of exemptions on certain expenditures and investments such as that on home loans, house rent, and Section 80C instruments.
The old tax regime has several deductions such as professional tax, standard deduction, HRA exemption, Section 80CCD(1B), Section 80C, and Section 80D. Those who opt out of the old tax regime will lose out on the deductions subscribed to previously. But those who start off their professional lives can benefit from the new regime greatly as they do not have to pay any tax till their income is less than Rs. 7 lakhs. They do not have to claim exemptions or make tax-saving investments until a point.
Here is a list of annual income and the tax you have to pay against it under the old tax regime:
· Rs. 7 lakhs = Rs. 22,901
· Rs. 10 lakhs = Rs. 31,221
· Rs. 20 lakhs = Rs. 2,88,371
· Rs. 35 lakhs = Rs. 7,26,211
· Rs. 55 lakhs = Rs. 15,69,316
Here is a list of annual income and the tax that you have to pay against it under the new regime:
· Rs. 7 lakhs = No tax
· Rs. 10 lakhs = Rs. 54,600
· Rs. 20 lakhs = Rs. 2,96,400
· Rs. 35 lakhs = Rs. 7,64,000
· Rs. 55 lakhs = Rs. 15,27,240
Thus, the new tax regime offers more power to the middle-class income group. They will have a better consumption ability and can spend the additional amount of income in place they see fit without having to think much about different investment schemes and restrict their cash flow.
