What are the critical factors to consider while selecting a tax regime? Are deductions and exemptions available in both? Can an employee change the tax regime during the financial year? Is there a tax regime comparison calculator?
Employees who are yet to file their ITR (even after the July 31 deadline) may have a few unanswered questions in their minds.
CA Amaranath AS, Co-founder, Arush India, was at our Parichay webinar to help us decode the differences between the old and new tax regimes. He also shared valuable knowledge and tips about making informed decisions for optimizing tax liabilities.
Missed the live session? You can still watch the full webinar recording below.
If you prefer to see the highlights before watching, read on!
Why was the new regime introduced by the government?
The old regime has different types of exemptions and deductions with their own conditions. Employees had to maintain multiple receipts and documents for submission to the employer. The government introduced the new regime to simplify and rationalize the tax laws.
Is there a shortcut to choose the right regime?
There is no shortcut or straight answer. However, there are calculators on certain portals (including income tax.gov.in) that can help you decide which one is more beneficial.
Can an employee change the tax regime after opting for one?
Once the option has been exercised by the employee, the regime cannot be changed in between. However, the regime can be changed when filing an ITR. However, there are restrictions for those with a business or professional income.
Has the new regime been the same since its introduction in 2020?
No. Before 2023, the new tax regime was slightly different. From 2023 (FY24) onwards, significant changes were made to it. This initiative aims to encourage people to adopt the new regime.
Why was the new regime amended in 2023?
A survey revealed that only 28% of the people opted for the new regime. This clearly showed that the purpose of the new regime was defeated. So, the government brought in various amendments to make it more attractive.
What were the amendments made in 2023?
- Removed earlier, the Standard Deduction of INR 50,000 has been reintroduced.
- The tax rebate has been increased from INR 5 lakhs to INR 7 lakhs. Therefore, an employee drawing a salary of up to INR 7.5 lakhs need not pay any tax.
- As per the amendment, individuals earning more than INR 5 crores must pay a surcharge of only 25%, not 37%. But they have to opt for the new regime.
- The new regime will be the default regime if the individual does not opt for anything.
But the tax calculations will be made under the old regime in this case. Earlier, the old one was the default regime. - The tax slabs have also changed in both regimes.
Want to hear it directly from the SME?
Watch the Webinar Recording
(Disclaimer: The information provided here is based on our insights from this webinar. So, we urge you to refer to the official communication before making any financial decision.)Please note: Budget 2024-25 has introduced further changes to the income tax regime.
