The union budget announced yesterday has given additional incentives to taxpayers who choose the new tax regime to file their returns. The finance minister says over two-thirds of the taxpayers have chosen the new tax regime in FY23 to file their tax returns.
Under the proposed provisions, if a salaried or a retired taxpayer chooses the new tax regime, he will now get a standard deduction of Rs 75,000 instead of Rs 50,000, which was applicable till last year, on his/her salary or pension income. But for those who opt for the old tax regime the standard deduction will continue to remain at Rs 50,000.
The budget has also tweaked tax slabs and tax rates in favor of taxpayers and pensioners who opt for the new tax regime.
The new tax slab will continue to have nil tax up to an income of Rs 3 lakh, like the previous year.
But now income between Rs 3-7 lakh will attract a tax rate of 5 per cent, earlier 5 per cent tax was applicable on income of between Rs 3-6 lakhs.
Income of between Rs 7-10 lakh will now be taxed at 10 per cent instead of income between Rs 6-9 lakhs.
Similarly, income of between Rs 10-12 lakh will now be taxed at 15 percent, earlier it was for income between 9-12 lakhs.
Tax on income between 12-15 lakh will continue to remain same at 20 per cent and income above Rs 15 lakh will also remain constant and taxed at a rate of 30 per cent.
In addition to this, the budget has also allowed higher deductions for employers’ contributions toward employees’ NPS Contributions. To make the New Tax Regime more attractive for salaried employees, the budget has proposed to raise the limit of 10 per cent for employer’s contribution to 14 per cent of the salary for contribution toward the NPS account for all categories of employees under the New Tax Regime.
Tax filing under the new tax regime will also get enhanced deductions for family pensions. Currently, the deduction is allowed to an amount equal to one-third of the family pension subject to a maximum of Rs 15,000 as a standard deduction against the family pension.
The same is now enhanced to Rs 25,000 if you opt to file the return under the new tax regime.
However, even with all these benefits Old tax regime will be beneficial for taxpayers who are living in rented accommodation or have taken a home loan or both.
In the new tax regime, taxpayers won’t get the benefits of deductions for taking a housing loan, deductions on rent paid, or benefits of investments made under Section 80 CCC in PPF, FDs, ELSS or other tax saving schemes.
