New Tax Regime Benefits: On April 1, 2020 (FY 2020-21), the Government of India introduced a new optional tax rate scheme for individuals and HUF. Section 115 BAC was added to the Income Tax Act of 1961.

The New Tax Regime mandates lower tax rates for individual taxpayers and HUFs who do not claim certain tax deductions or exemptions available in the old regime. 

Based on amendments proposed in Union Budget 2023, the new tax regime has become the default regime. This means taxpayers have to opt for the old tax regime if they wish to utilise its benefits. If they don’t opt for the old regime, the new regime will apply by default. 

However, those who opt for the new regime cannot claim different exemptions and deductions such as HRA, LTA, 80C, 80D and so on. 

Under the new tax regime, there have been several changes to income tax slabs, deductions and exemptions. Let’s explore some key points:

Income Tax Slabs under New Regime

The tax exemption limit of Rs 2.5 lakh has increased to Rs.3 lakh under the new tax regime.

The revised income tax slabs for the financial year 2023-24 (assessment year 2024-25) are as follows:

Surcharge Amount

The surcharge rate has been reduced to 25% from the previous 37% for taxpayers earning more than Rs 5 crore under the new tax regime.

Also Read: Income Tax Return Last Date 2024: ITR Filing Due Date – All details

Tax Rebate

A tax rebate has been introduced for incomes up to Rs. 7 lakh under the new tax regime. This means that taxpayers with an income of up to Rs. 7 lakh pay zero tax if they choose the new regime

Tax-free perks under the new regime

Following exemptions and deductions are allowed in the New Regime:

1. Standard Deduction: Up to Rs 50,000 for salaried individuals.
2. Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
3. Transport allowances in case of a specially-abled person.
4. Interest on Home Loan (Section 24b) for a let-out property.
5. Contributions to Agniveer Corpus Fund (Section 80CCH).
6. Deduction for additional employee cost (Section 80JJA)
7. Any compensation received to meet the cost of travel on tour or transfer.
8. Perquisites for official purposes
9. Gifts up to Rs 50,000
10. Exemption on gratuity u/s 10(10)
11. Daily Allowance
12. Exemption on voluntary retirement 10(10C)
13. Deduction on Family Pension Income

Long-Term Capital Gains (LTCG)

Taxpayers can still avail themselves of the deduction on long-term capital gains from the sale of equity shares or equity-oriented mutual funds, up to a limit of Rs 1 lakh under the new regime.

Leave Encashment

Exemption on leave encashment is available under the new tax regime.

The exemption threshold was increased from Rs 3 lakh to Rs 25 lakh for non-government employees in Budget 2023

Who can benefit from the New Regime?

Based on the above information, it is clear that the new tax policy benefits individuals with income up to Rs 7 lakh. It is also beneficial for individuals who claim fewer deductions for tax savings. Individuals in higher income tax categories, earning more than Rs15 lakh yearly, might also benefit from the current regime by making tax-saving investments. 

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Disclaimer: The above content is for informational purposes only. Please consult your financial advisor before investing in any scheme.