Understanding Income Tax Regimes in India for FY 2023-24 (AY 2024-25): Old vs New.
As we step into the financial year 2023-24, taxpayers in India have the option to choose between the old and new income tax regimes. Each regime offers different tax rates and benefits, catering to varying income levels and taxpayer categories.
Old Tax Regime
Under the old tax regime, taxpayers can avail deductions and exemptions on various investments and expenses. Here’s a breakdown of the tax slabs applicable for FY 2023-24:
For Individuals below 60 years:
- Income up to Rs. 2,50,000: Nil tax
- Income from Rs. 2,50,001 to Rs. 5,00,000: 5% tax
- Income from Rs. 5,00,001 to Rs. 10,00,000: 20% tax
- Income above Rs. 10,00,000: 30% tax
For Senior Citizens (Aged 60 years or more but less than 80 years):
- Income up to Rs. 3,00,000: Nil tax
- Income from Rs. 3,00,001 to Rs. 5,00,000: 5% tax
- Income from Rs. 5,00,001 to Rs. 10,00,000: 20% tax
- Income above Rs. 10,00,000: 30% tax
For Super Senior Citizens (Aged 80 years and above):
- Income up to Rs. 5,00,000: Nil tax
- Income from Rs. 5,00,001 to Rs. 10,00,000: 20% tax
- Income above Rs. 10,00,000: 30% tax
Deductions and Exemptions (Old Tax Regime):
- Standard Deduction of Rs. 50,000 for Salaried and Pensioners
- Deduction for Professional Tax paid
- House Rent Allowance (HRA) Exemption
- Leave Travel Concession (LTC)
- Deduction of Interest on Self Occupied House Property up to Rs. 2 lakh
- Deduction for Interest on Let Out Property up to Rs. 2 lakh
- Deduction under Section 80C to 80U (e.g., PF, LIC Premium, Mutual Fund investments, etc.)
- Health and Education Cess applicable
New Tax Regime
The new tax regime offers lower tax rates but eliminates most deductions and exemptions. Here are the tax slabs applicable under the new regime:
- Income up to Rs. 3,00,000: Nil tax
- Income from Rs. 3,00,001 to Rs. 6,00,000: 5% tax
- Income from Rs. 6,00,001 to Rs. 9,00,000: 10% tax
- Income from Rs. 9,00,001 to Rs. 12,00,000: 15% tax
- Income from Rs. 12,00,001 to Rs. 15,00,000: 20% tax
- Income above Rs. 15,00,000: 30% tax
Deductions and Exemptions (Not Allowed in New Tax Regime):
- Standard Deduction
- Deduction for Professional Tax paid
- House Rent Allowance (HRA)
- Leave Travel Concession (LTC)
- Deduction of Interest on Self Occupied House Property
- Deduction under Section 80C to 80U
Choosing Between Old and New Regimes
The choice between the old and new tax regimes depends on various factors such as income levels, investment patterns, and availing of specific exemptions. Taxpayers need to calculate their tax liability under both regimes to make an informed decision.
While the new regime simplifies tax calculations with lower rates, it removes several avenues for tax savings available under the old regime. Therefore, individuals should assess their financial situation and consult with tax advisors if needed to determine the most beneficial option.
In conclusion, the FY 2023-24 presents taxpayers with a critical decision regarding their income tax regime, impacting both their tax outflow and potential savings through deductions and exemptions. Understanding these regimes thoroughly will empower taxpayers to make the right choice aligned with their financial goals and circumstances.
