As the New Financial Year 2024-25 starts from today, you might have come across a number of news websites or social media posts writing about change in New Tax Regime. The misleading language of such articles or posts are further confusing readers. However, the fact is that there is no such change.
The Finance Ministry has also taken note of the misleading information related to the new tax regime being spread on social media platforms. For clarity, here are the facts related to new tax regime that you need to know.
First, there is no new change in the New Tax Regime from today i.e. April 1, 2024.
Second, the New Tax Regime is the default regime for FY 2023-24 i.e. April 1, 2023. What this means is that the tax slab and rates under new regime applies by default if you don’t specify your choice. As a taxpayer, you can choose new or old regime depending on your needs. (Check Income Tax Slabs and Rates for FY 2024-25)
However, many social media posts are misleading readers by claiming that the New Tax Regime has become the default regime from April 1, 2024. But this is not true. The fact is that the new regime is the default regime for FY 2023-24 and the Assessment Year corresponding to this is AY 2024-25.
“New tax regime is applicable for persons other than companies and firms, is applicable as a default regime from the Financial Year 2023-24 and the Assessment Year corresponding to this is AY 2024-25,” the Finance Ministry says.
Third, you can opt out of the new regime till filing return for AY 2024-25. The last date of filing ITR for AY 2024-25 or FY 2023-24 will be July 31 for salaried employees.
Fourth, if you are a salaried employee without any business income, you will be able to choose either old or new regime for each financial year. For example, you may choose new tax regime in FY 2024-25 and old tax regime in FY 2025-25 and vice versa.
Fifth, the new tax regime under section 115BAC (1A) came into effect through Finance Act 2023. The new regime does have as many exemptions and deduction as available under old regime.
Sixth, there is also a confusion around whether new regime is beneficial or the old regime is beneficial. Well, you should know that under the new regime, tax rates are significantly lower. However, the benefit of various exemptions and deductions are not available in the new regime. In new regime, only a standard deduction of Rs 50,000 from salary and Rs. 15,000 from family pension is available. However, old regime has multiple deductions and exemptions.
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