Changes in the new tax regime: everything you need to know | A new tax regime has been introduced
through the Union Budget 2020. In this tax regime, the income tax rates are lower and if a person opts
for this regime, he will have to lose most of the benefits.
Who can choose the new tax regime?
Only individuals and Indian Undivided Families (HUFs) can opt for the new tax regime. That is partnership firms, companies, associations of individuals, legal entities, and trusts cannot opt for this tax regime.
Are there any changes in the new tax regime?
Although the new tax regime was introduced through the Union Budget 2020, it underwent several changes through the Union Budget 2023. These changes are as follows:
1) Standard deduction
Earlier, under the new tax regime, there was no provision for the standard deduction. That is, individuals cannot claim the standard deduction on their income. But now, through the Union Budget 2023, people can claim this standard deduction, worth Rs. 50,000.
2) Standard tax system
The new tax regime will become the standard tax regime after filing the income tax return. However, if a person wants to declare ITR under the old tax regime, they have to select this option manually.
3) Changes in income tax rates
The new rates of the previous tax regime were multiple income taxes. This created a lot of confusion in people’s minds. Therefore, to alleviate this situation, the Government has amended the Income Tax Board rates. In addition, there is a reduction in tax liabilities through the new rates of the tax regime.
4) Basic discount limits
Under the latest new tax regime, the basic exemption threshold is Rs. 2.5 l. 3 lakes. On the other hand, this limit remains the same as under the old tax regime, i.e. Rs. 2.5 Lakh.
In addition to the above, the deduction limit under the new tax regime is now Rs. 7 rupees 5 lacs. That is, the taxable income of a person opting for the new tax regime is Rs. 7 Lakh, then he will have to pay zero tax on his income. But in the old tax regime, this rebate limit remains the same i.e. Rs. 5 lakhs.
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