Income Tax 2023, old tax slab vs new tax lab: Under the new system, if your salary is Rs 6 lakh, your tax liability will be Rs 23,400.
Income tax is the biggest liability of any salaried person. It is a duty for everyone to pay their income tax so that the government can develop the country and make schemes for the under-privileged. However, the government also gives a chance to taxpayers to save their taxes by investing in long-term saving schemes and investing in financial instruments. Finance Minister Nirmala Sitharaman will present Budget 2023-24 next month. It is expected that she will give tax exemption to the middle class. The Narendra Modi government had introduced a new tax system with flat rates, a few years ago. However, unlike the old system, the new system doesn't allow taxpayers to save their taxes legally. What's the difference between the new and the old income tax system?
Under the old tax system, any one with annual income upto Rs 2.5 lakh is completely exempt from income tax. There is five percent tax for income upto Rs 2.5 and five lakh. People can also save Rs 1.5 lakh by way of investments. Salaried people also get Rs 50,000 as standard deduction. However, the government also gives an exemption of Rs 12500. Which means you pay zero tax till you earn Rs 5 lakh.
Under the new system, if your salary is Rs 6 lakh, your tax liability will be Rs 23,400. If your salary is more than Rs 1 lakh per month, your tax liability will be Rs 13400 after adding 4 percent cess.
In the old regime, one can invest in LIC premiums, EPF and PPF under Section 80C. If you invest in the National Payment System, you can claim tax rebate under Section 80CCD (1B). This will provide you with a Rs 50000 rebate apart from the 1.5 lakh 80C rebate.You can also save money through insurance, health insurance, home loan repayments etc.
The new regime has been brought for those who don't invest in long-term investments. Here is the difference between the new and the old tax regimes.
Here is the old tax structure: Upto Rs 2 lakh: Nil in both tax rates.Rs 2.5 lakh to Rs 5 lakh: 5 percent in both.
Rs 5 lakhs and Rs 7.5 lakhs: 20 percent in old, 10 percent in new.
Rs 7.5 lakh to Rs 10 lakh: 20 percent in old and 15 percent in new.
Rs 10 lakh to Rs 12.5 lakh: 30 percent in old and 20 percent in new.
Rs 12.5 lakh to Rs 15 lakh: 30 percent in old and 25 percent in new.
Rs 15 lakh and above: 30 percent in both regimes.