Taxpayers opting for the new tax regime can avail several exemptions apart from the standard deduction.
New Delhi. The government has given a big relief to the taxpayers who have opted for the new tax regime. In the new tax regime, the income tax exemption limit has been increased to Rs 7 lakh, which was earlier Rs 5 lakh. While under the old tax regime, income up to Rs 2.5 lakh was tax free. However, in the old tax regime, there is a provision for Standard Deduction and many exemptions in other items. These benefits were not given in the new tax regime. But this time standard deduction has also been included in the new tax system.
The Finance Ministry has made 5 major announcements regarding personal income tax in the budget 2023-24. These announcements are related to exemption, change in tax structure, extension of standard deduction exemption in the new tax regime, reduction in highest surcharge rate and extension of tax exemption limit on leave encashment on retirement of non-government salaried employees.
First understand what is New Tax Regime
In order to make the process of tax payment simple and easy, the Finance Ministry introduced a new income tax regime during the budget 2020. The system of 2020 was called ‘Simplified Tax Regime’. The new tax regime was brought in keeping in mind those taxpayers who are not in a position to invest and claim deductions. In the new system, more slabs were placed than in the previous one. Under this, the government gave the option of lower tax rates with the option of giving up some tax deductions and tax exemptions.
Taxpayers can take these benefits
A taxpayer can claim up to Rs 50,000 for standard deduction, while every salaried individual with an income of Rs 15.5 lakh or more is entitled to Rs 52,500 as standard deduction. Under the new tax regime, the basic exemption limit has been increased to Rs 3 lakh. There is no exemption on investing in savings schemes in the new tax, but there is no tax on income of Rs 7.5 lakh including standard deduction. Whereas, in the old tax regime, you will have to pay tax only on income above Rs 5 lakh.
Surcharge reduced to 25 percent
With regard to personal income tax, the Finance Ministry has reduced the highest surcharge rate from 37 percent to 25 percent in the new tax regime for income above Rs 2 crore. Due to this, the highest tax rate will come down from the present 42.74 percent to 39 percent. The Finance Ministry has made it clear that taxpayers opting for the old tax regime will not get the benefit of any change in surcharge.
Leave encashment
In Budget 2023, according to the government salaried class, the tax exemption limit has been increased on leave encashment of Rs 25 lakh on retirement of private salaried employees. At present the maximum amount on which exemption can be granted is Rs 3 lakh. In Budget 2023, the Finance Ministry has kept the new tax regime as default.
