The most awaited budget changes for the year 2023 have been presented by the Union Finance Ministry. The extremely well-planned and balanced budget brings in great news for taxpayers with a rebate in the minimum tax range from 5 Lakhs to 7 Lakhs. The simplified new tax regime for 2023 has been received with delight among investors. It has a standard deduction of ₹50,000 along with simplified slabs and rates, definitely makes it an ideal choice for people to choose.

As always there has been a big hype about the changes that the Budget 2023 would bring to the table of tax slabs. Now that the new tax regime has been announced what is the significant changes that make it stand out from the old tax regime? Which one has better benefits? Delve in and read on to know more about the slab rate comparison between old tax regime and new tax regime along with other significant changes that tax payers need to consider before choosing.

Highlights of the New Tax Regime

• The new tax regime brings in a lower and wider tax slab rate.
• The simplified new tax regime bids goodbye to certain tax deductions and exemptions.
• The new tax policy gives taxpayers the flexibility to invest their money however it is suitable.

Old Tax Rates Vs New Tax Rates

Let’s start with a comparison between the old tax slab rates and the new tax slab rates that the budget 2023 has given.

The important change that has been proposed in the new tax regime is that for individual tax payers the tax rebate limit has changed from ₹5 Lakhs to ₹7 Lakhs per year.

Deductions That the New Tax Regime Debunked

The following are a few of the well-known tax deductions/exemptions that are no longer permitted under the new tax regime:

• Leave travel allowance (LTA)
• House rent allowance (HRA)
• Education allowance for children
• Standard salary deduction
• Professional tax deduction
• Home loan interest
• Deductions under Section 80C, 80D, etc

Old Tax Regime Vs New Tax Regime

Before we move ahead it is necessary to understand what would be the other factors that make significant difference when calculating tax on your income.

An example would make it easier to understand how tax is being calculated. Let’s assume Mr Arjun is earning ₹10 Lakhs, this is how his tax would be calculated:

Section 80C: The section that allows tax payers to reduce their taxable income by making investments
Section 80D: The section that allows taxpayers to reduce taxes on medical insurance premiums paid for themselves, their spouses, parents, and dependent children.
Section 24(b): The interest on a home loan can be deducted from taxable income under Section 24b of the Income Tax Act.

Arjun’s total taxable income in terms of old tax regime: ₹7,50,000

Arjun’s total taxable income in terms of new tax regime: ₹10,00,000

If Arjun is opting for the old tax regime, Under Section 80C he can make an investment up to ₹1,50,000 and avail tax exemption on the same.

Form 15G Vs Form 15H

It is mandatory to fill in form 15G and form 15H if your taxable income exceeds the tax slab limit. Form 15G is for individuals, whereas form 15H is for senior citizens.

Note: The form 15G and 15H is valid for one year. Verification of the validity can be done online.

The Right Time to Invest is Right Now

It is necessary to plan your finances ahead of time to earn attractive returns. The best time to plan your finances is right before the end of a financial year, thereby you can save taxes with your investment and you can plan your strategy for the next financial year taking into consideration the best way to avoid paying tax on your returns.

Key Highlights

• The new tax regime revamps the tax rebate limit to ₹7 lakhs.
• Several popular exemptions and deductions have been debunked.
• By opting for old tax regime investors can avail tax exemption under Section 80C.
• The new tax regime has been set the default regime, but the old regime continues to be available for tax payers to choose from.

FAQs

1. What are the highlights of the 2023 budget?

• A person with a yearly salary of ₹9 lakhs will have to pay only ₹45,000 in taxes.
• A salary of ₹15 lakhs will attract a tax of ₹1.5 lakh, down from ₹1.87 lakh.
• The new system includes a ₹50,000 standard deduction for taxpayers.

2. Which tax regime is better? Old tax regime or new tax regime?

Just like how there is no one size that fits all, the selection of tax regime depends upon your financial plan. The old regime provides tax payers with options to make investments under Section 80C, whereas the new tax regime provides lower slab rates.

3. Can I change from the new to the old regime?

Yes, an individual can choose between the new and old tax regimes in each financial year. However, the ability to convert between the new and old tax regimes is only available to those with salaried income and no company income.