The Income Tax Return (ITR) filing for FY 2023-24 presents a choice between the new and old tax regimes in India. The new regime, introduced in the Union Budget 2020, offers lower tax rates but comes with the condition of forgoing certain exemptions and deductions. This trade-off between reduced tax rates and the ability to claim various benefits requires individuals and Hindu Undivided Families (HUFs) to make an informed decision based on their financial circumstances.
Key Features of the New Tax Regime for FY 2023-24
- The new tax regime is now the default option unless individuals choose to opt for the old regime.
- Individuals must make the choice between the tax regimes while filing their tax returns.
- Most exemptions and deductions are eliminated in the new regime, including popular ones like Section 80C, Section 80D, and House Rent Allowance (HRA).
- Some deductions, such as standard deduction and employer contribution to NPS, are still available under the new regime.
- Resident individuals with income up to Rs 7 lakhs do not have to pay tax due to the rebate under Section 87A.
- Tax rates are structured differently in the new regime.
- The highest surcharge rate has been reduced to 25% for income over Rs 2 Cr, resulting in an effective tax rate of 39%.
Make an informed decision based on your financial situation before choosing between the old and new tax regimes for FY 2023-24. Evaluate the impact of deductions and exemptions to determine the most beneficial option for you. Ensure to file your tax returns on time and stay compliant with the regulations.
Read more about Income Tax Return Filing FY 2023-24: Top myths to keep in mind when filing ITRIllustration for comparison of old and new tax regime:
Example scenarios show the impact of deductions and exemptions on tax liabilities under the old and new tax regimes. Evaluate your specific circumstances to make an informed choice that aligns with your financial goals.
Author: Parizad Sirwalla, National Leader, Global Mobility Services – Tax, KPMG in India
