![ITR filing: Here is a lowdown on new income tax regime— check exemptions and deductions | Mint 1 mint](https://thespuzz.s3.ap-south-1.amazonaws.com/thespuzz/uploads/2022/08/05192956/mint.png)
Although a range of tax-related changes are introduced every year for taxpayers, a few key changes are ‘radical’ and occur only once every three or five years.
The introduction of the ‘new tax regime’ is undoubtedly one such key change that is substantive, and will transform the way income tax is calculated and deductions allowed.
The Finance Act 2023 amended the provisions of Section 115BAC with effect from FY2024-25 which made the new tax regime (NTR) the default tax regime for the assessee.
However, taxpayers still have the freedom to opt out of the new tax regime and choose the old tax regime instead.
“Choosing Income Tax regimes depends on your eligible deductions and exemptions. Old Tax Regime has high Slab rates but all the Exemptions and Deductions are available. On the other hand, the New Tax Regime has low tax rates, with very limited available deductions and exemptions,” says chartered accountant Pratibha Goyal, Partner, PD Gupta and company.
Key questions taxpayers should know with regards to New Tax Regime:
What is the new tax regime?
The new tax regime refers to lower tax rates, which come into force when assessees forgo the deductions and exemptions given earlier such as for making investments in PPF (Public Provident Fund), NSC (National Savings Certificate) and LIC (Life Insurance Corporation).
Is the new tax regime compulsory?
The new tax regime is the default regime but not mandatory. Taxpayers have the option to choose the old tax regime.
What is the old tax regime?
The old tax regime refers to the system of income tax calculation and slabs which existed prior to the introduction of this new regime. In the old tax regime, taxpayers are given the option to claim various tax deductions as well as exemptions.
What are the rates of tax applicable in the new tax regime?
Up to ₹3 lakh, there is no income tax. Between ₹3 and ₹6 lakh, the tax rate is 5 per cent. For income between ₹6 lakh and ₹9 lakh, income tax will be ₹15,000 plus 10 per cent above ₹6 lakh.
(Source: https://www.incometax.gov.in/)
As shown in the table above, when the income is between ₹9 lakh and ₹12 lakh, tax will be ₹45,000 plus 15 per cent above ₹9 lakh. For income between ₹12 lakh and ₹15 lakh, tax is ₹90,000 plus 20 per cent above ₹12,00,000.
For income above ₹15 lakh, tax under the new tax regime is ₹1.5 lakh plus 30 per cent of tax above ₹15 lakh.
Deductions and exemptions available under new tax regime
Deductions are not permitted in the new tax regime barring the deductions under section 80CCD (2), 80CCH. Section 80CCD (2) refers to the deduction towards contribution made by an employer to the pension scheme of the central government.
Section 80CCH refers to the deduction in respect of contribution to the Agnipath Scheme.
Other deductions that are not permitted in the new tax regime include deductions for payments made to life insurance premiums, provident funds, house loan principal, LIC annuity plans, and the central government pension scheme.