The Finance Ministry stated on March 31, 2024, refuting rumours circulating on social media platforms regarding changes in the new tax regime. The ministry clarified that no alterations are set to occur in the financial year beginning April 1, 2024. Concerns were raised in public over rampant misinformation spread on various social media channels, prompting the ministry to intervene and provide clarity on the matter. Addressing such posts on Platform X, the ministry clarified that there would be no modifications in the tax structure effective from April 1 and the income tax department retweeted it.
"It has come to notice that misleading information related to the new tax regime is being spread on some social media platforms. It is therefore clarified that: There is no new change coming in from 01.04.2024. The finance ministry on Monday said there is no change in the new income tax regime for individuals for the current fiscal year and individual taxpayers can opt out of the regime at the time of filing their ITR," the ministry said on the X platform.
Under the new tax regime, the tax rates are significantly lower, though the benefit of various exemptions and deductions (other than the standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension) is not available, as in the old regime. The new tax regime is the default tax regime, however, taxpayers can choose the tax regime (old or new) that they think is beneficial to them. Option for opting out from the new tax regime is available till filing of return for the AY 2024-25.
However eligible persons without any business income will have the option to choose the regime for each financial year. So, they can choose a new tax regime in one financial year and an old tax regime in another year and vice versa.
The new tax regime, which will be the default one from the financial year 2023-24, and AY 24-25 has rates ranging from 5 per cent to 30 per cent based on income brackets. Income between Rs 9-12 lakh and Rs 12-15 lakh is subject to 15 per cent and 20 per cent tax, respectively. A 30 per cent income tax would be levied on income above Rs 15 lakh.
Conversely, the old regime grants various deductions and exemptions. It exempts income up to Rs 2.5 lakh from taxation and imposes tax rates as follows. Income from Rs 2.5 to Rs 5 lakh attracts 5 per cent tax, 20 per cent tax is levied on income between Rs 5 lakh and Rs 10 lakh. Any income above Rs 10 lakh attracts 30 per cent tax.
As a thumb rule, for individuals earning less than Rs 15 lakhs, the new tax regime is generally helpful in lowering tax liability. But specifically, it is helpful when total deductions remain below Rs 1.5 lakhs. Individuals with no housing or education loans and staying in their own houses may find the new tax regime more attractive.
Contrarily, the old regime becomes more beneficial when total deductions exceed Rs 3.5 lakhs.
