Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta, on October 10, 2023, said that around 70 per cent of personal income taxpayers might transition to the new tax regime, as the FY24 Union budget has made it more attractive. Moreover, he highlighted that around 60 per cent of corporate income is already taxed under the low tax rate regime.
Tax Slabs with Lower Rates: The new tax regime brings in more tax slabs with lower tax rates, which can significantly impact your tax liability. In this regime, for Rs 0 to Rs 3 lakh income, no tax will be levied, and from Rs 3 lakh to Rs 6 lakh, a 5 per cent tax would be charged, and for Rs 6 to Rs 9 lakh, the rate is 10 per cent.
Vishnu Kalarikkal, who works in a social media company, said his salary is more suited to the new tax regime. "This is because the main benefit from my company is salary, and not other benefits like a new tax, housing rent allowance (HRA), etc., so a new tax regime is better for me".
Exemptions and Deductions Not Allowed: Unlike the old tax regime, the new one doesn't allow several major exemptions and deductions, such as leave travel allowance (LTA), housing rent allowance (HRA), standard deduction of Rs 50,000, and deductions under Section 80C, 80D, and for interest paid on home loans, among others.
Aldrin Jim, who works in a personal fitness company in Mohali, says that he plans to invest in tax-saving instruments like ELSS. "So I will preserve my option to transition to the old tax regime later. I am unsure if the tax benefits will compute a lower tax liability if I shift to the old tax regime with just investments in ELSS; I have to compute my tax liability to see what works out later. But for now, the new tax regime lowers my tax liability," he said.
Taxpayers who don't prefer investing in tax-saving instruments and don't qualify for any income exemptions may find the reduced slab rates of the new regime more advantageous.
To determine which regime is more beneficial for you, calculate your income tax liability under both the old and new regimes. In the old regime, calculate taxes using the tax slab rates and add eligible exemptions and deductions.
Gupta further explained that even if an employer deducts tax as per the new regime, taxpayers can choose between the old and new regimes when filing their returns. Individuals with income from business or a profession have a single chance to switch back to the old regime after they choose the new tax regime.
Gupta revealed that direct tax collections had reached Rs 9.57 trillion by October 9 in the current fiscal year, up 21.8 per cent from the same period the previous year. Corporate and personal income tax contributions comprise over half the total budget estimates of Rs 18.2 trillion for this fiscal year
In terms of collections, corporate tax grew by 12.39 per cent, while personal income tax receipts increased by 32.5 per cent, excluding the securities transaction tax (STT).
