The Ministry of Finance has made it clear that, as of April 1, 2024, there would be no additional changes to the tax system.
The Finance Act of 2023 instituted a new tax scheme, known as section 115BAC(1A), in contrast to the previous one (which lacked exclusions).
As of the Financial Year 2023–2024, a new tax regime will be in effect for individuals who are not corporations or businesses. The Assessment Year that corresponds to this regime is AY 2024–2025.
The tax rates are substantially lower under the new tax regime, but unlike the previous one, there are no longer any exclusions or deductions available (except from the standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension).
The default tax regime is the new one, however taxpayers are free to select the tax regime (old or new) that best suits their needs.
Up until the filing of returns for the AY 2024–2025, there is still time to choose not to participate in the new tax regime. Every financial year, those who meet the requirements but do not have any revenue from their firm will be able to select the regime. Thus, they have the option to select the old tax regime for one financial year and the new tax regime for another, and vice versa.
The new tax system’s adoption provides taxpayers with a number of advantages, including:
The requirement for taxpayers to keep track of their airline tickets and rental receipts has been lifted. Simplifying tax planning is the goal of the modifications.
The ₹2.5 lakhs basic exemption limit has been increased to ₹3 lakhs. This increases the attractiveness of the new tax system.
For anyone earning more than ₹5 crores, the surcharge rate dropped from 37% to 25%. This lower surcharge rate is exclusively available to those who select the new tax structure.
The rebate cap has gone up under the new tax structure. Currently, the relevant rebate ceiling is ₹25,000 for incomes up to ₹7 lakhs.
On February 1, 2024, Union Finance Minister Nirmala Sitharaman announced that there would be no tax changes and suggested keeping the existing rates for direct and indirect taxes, including import charges. The Union Finance Minister further stated that the average time for refunds has been reduced from 93 days in 2013-2014 to just 10 days in the last year. She added that the average real income of people has increased by 50%.
The income tax slabs as per the new tax regime are as follows:
Income from ₹0 to ₹3,00,000: 0% tax rate
Income from ₹3,00,001 to ₹6,00,000: 5%
Income from ₹6,00,001 to ₹9,00,000: 10%
Income from ₹9,00,001 to ₹12,00,000: 15%
Income from ₹12,00,001 to ₹15,00,001: 20%
Income above ₹15,00,000: 30%
