It is significant to note that if a taxpayer chooses the new tax system, they will not be able to take advantage of deductions like Section 80C, Section 80D, and others.
In order to encourage more adoption, Finance Minister Nirmala Sitharaman suggested a considerable modification to the new tax structure in the Union Budget 2023. These changes will become effective in the 2023–2024 fiscal year. India's Union Budget 2020 unveiled a new tax system that gives lower tax rates to anyone who is ready to give up specific exemptions and deductions. Up until the fiscal year 2022–2023, taxpayers can decide to continue paying under the previous system; however, the new system will become the default on April 1 of 2023.
If taxpayers are ready to give up exemptions and deductions like the House Rent Allowance (HRA), Leave Travel Concession (LTC), and others, they can take advantage of lower tax rates under the new tax system.
For individuals with income up to-
- Rs. 3 lakhs: No tax
- Rs. 3 lakhs and Rs. 6 lakhs: 5% tax
- Rs. 6 lakhs and Rs. 9 lakhs: 10% tax
- Rs. 9 lakhs and Rs. 12 lakhs: 15% tax
- Rs. 12 lakhs and Rs. 15 lakhs: 20% tax
- Above Rs. 15 lakhs: 30% tax
It's crucial to remember that if a taxpayer opts for the new tax system, they won't be able to take advantage of deductions like Section 80C, Section 80D, and others.
Exemptions under the New Tax System 2023–2024
The tax slabs have been reorganised, and starting with the upcoming fiscal year, everyone will use the new tax regime by default. The new tax structure included a lower tax rate but no available exemptions. The tax-free has been increased to Rs 7 lakh.
Standard Deduction
A salaried taxpayer is permitted to claim a standard deduction of up to Rs 50,000. According to the new tax law, family pensioners are eligible for a standard deduction of Rs 15,000 per year.
NPS contribution by employer
As a salaried employee, you are qualified to claim a deduction for the contribution made from gross income if your company makes contributions to your NPS account. According to Section 80CCD (2) of the Income-tax Act of 1961, this deduction is requested. 10% of the remuneration (Basic + DA) may be deducted at most under Section 80CCD(2).
Agniveer Corpus fund
the Agniveer may deduct from income any sum paid or deposited to the Agniveer Corpus Fund under the newly proposed section 80CCH of the Income-tax Act, as per the announcement in the Budget speech.
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