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Income Tax Slab: If you are going to file ITR for the financial year (2023-24) i.e. assessment year 2024-25, then it is very important for you to know whether the new tax system is better or the old one. Today we will tell you 8 benefits of the new tax system, which have been told by our experts CA Ajay Bagadia, CA Santosh Mishra and CA Abhinandan Pandey.
8 benefits of the new tax system
1) Lower tax rates
Taxpayers can benefit from lower tax rates in the new tax regime. This will reduce tax liability and increase disposable income.
CA Ajay Bagadia said that the Modi government is emphasizing on the new tax system by making it more attractive for the taxpayers. The new tax regime offers significantly lower tax rates to taxpayers.
2) Simple tax structure
The new tax regime has greatly simplified this tax structure by offering lower tax rates. The slabs under the new tax regime are as follows.
No tax on income up to Rs 3 lakh.
Income between Rs 3 lakh and Rs 6 lakh will be taxed at 5 percent (tax exemption available under section 87A)
Income between Rs 6 lakh and Rs 9 lakh will attract 10 percent tax (tax exemption under Section 87A is available on income up to Rs 7 lakh).
15 percent tax will be levied on income between Rs 9 lakh to Rs 12 lakh.
There is a provision of 20 percent tax on income between Rs 12 lakh to Rs 15 lakh.
Income of Rs 15 lakh and above will be taxed at 30 percent.
3) No tax cuts
Under the new system, the need to track and claim tax deductions has been eliminated to save time and effort for taxpayers.
CA Abhinandan Pandey says, “Taxpayers do not even have to go through the hassle of collecting and submitting details and evidence of expenses and investments.”
4) Basic Exemption Limit
CA Santosh Mishra says, “The basic exemption limit has been increased from ₹2.5 lakh to ₹3 lakh. This increased exemption limit makes the new tax regime more attractive. Note that the highest tax rate i.e. 30% will be imposed on income above Rs 15 lakh.
5) Change in surcharge rate
With the implementation of the new tax system, the surcharge has reduced from 37% to 25%. This is applicable for individuals with income above Rs 5 crore. This reduced surcharge is valid only for those taxpayers who opt for the new tax regime and whose income is more than Rs 5 crore.
6) Change in exemption limit
CA Ajay Bagadia says, 'Under the old tax system, the exemption limit on income up to Rs 5 lakh is Rs 12,500. However, under the new tax regime if the taxable income is less than or equal to ₹7 lakh, the exemption limit has increased to ₹25,000. Note that Section 87A exemption is applicable under both the income tax regimes. “Again, the budget announcement increased the taxable limit from ₹5 lakh to ₹7 lakh.”
7) Standard Deduction
The standard deduction for salaried individuals under both the old and new regimes is ₹50,000.
8) Rebate on leave encashment
Under the new tax system, you will get exemption on leave encashment. CA Santosh Mishra says, “In Budget 2023, the exemption limit for leave encashment for non-government employees was increased by 8 times i.e. from ₹ 3 lakh to ₹ 25 lakh. Therefore, as per section 10(10AA) on retirement, leave encashment up to ₹25 lakh is tax free.
Other deductions under the new system
Deduction of Rs 15,000 or 1/3 of pension (whichever is less) from family pension income.
Deduction of amount paid or deposited in Agniveer Corpus Fund under section 80CCH(2).