• UGI USER
  • Aug 03, 2024
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SHIFT TO NEW TAX REGIME

Why in the news?

  • 72% of India’s personal income tax payers opted for the new tax regime in 2023-24.
  • 27 crore returns filed under the new regime, compared to 2.01 crore under the old regime.
  • The number of Income Tax (IT) return filings rose 7.5% to a record 7.29 crore.
source:researchgate

Record High ITR Filings:

  • ITR filings reached 7.28 crore by July 31, 2024, up from 6.77 crore in the previous fiscal year.
  • Continuous increase in filings over recent years, reaching a new peak in 2023-24.

Factors Driving the Shift:

  • The new tax regime became the default option, with tax slabs reduced to five from six.
  • The tax-free income limit was raised to ₹3 lakh from ₹2.5 lakh.

About New Tax Regime:

  • Introduced in April 2023 to simplify the tax structure.
  • Basic income exemption limit set at Rs 3 lakh.
  • Offers more tax slabs with lower rates.
  • Standard deduction of Rs 50,000 from salary/pension income.
  • Allows deduction for employer’s NPS contribution up to 10% of salary (14% for government employees).

Tax Rates and Slabs:

New regime: Lower tax rates across multiple income slabs.

Old regime: Availability of deductions can sometimes result in lower tax liability.

Deductions and Exemptions:

  • Old regime: Wide range of deductions under sections 80C, 80D, and 80E.
  • New regime: Limits deductions to a standard deduction of Rs 50,000 and employer’s NPS contribution.

Flexibility vs. Simplicity:

  • Old regime: Flexibility with multiple deductions for tailored tax planning.
  • New regime: Simplicity with fewer deductions, easier tax compliance.

Associated Article:

https://universalinstitutions.com/indian-taxation-system/#:~:text=The%20rebate%20limit%20in%20the,3%20lakhs