Old tax regime vs new tax regime: New tax regime is simpler, hassle-free, says CBDT Chairman Nitin Gupta

BT Budget Roundtable 2023: Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta has said that the latest changes in the tax slabs of the new tax regime have made it attractive for taxpayers. He added that the exemption and deduction-free tax system is simpler and hassle-free with minimal compliance burden. Besides, it gives taxpayers the freedom to choose where they want to invest.  

“The choice is with the taxpayers on what regime they want to go with. A lot of changes have been made in spite of the fact that it is deduction- and exemption-free. There will be something left in terms of the amount saved and the investments. Therefore, we feel the regime is a game-changer,” Gupta said at the BT Budget Roundtable on Monday.    

Finance Minister Nirmala Sitharaman, while reading out the Budget statement for the next fiscal, proposed some changes in the personal income tax under the new regime. For the first time, the government reduced the number of slabs to five and increased the tax exemption limit to Rs 3 lakh, which was Rs 2.5 lakh before. 

The new regime with the new tweaks has increased the basic exemption limit, a higher threshold for claiming the full rebate, Standard Deduction, lower surcharge, less paperwork, and reduced compliance, Gupta said in a conversation with Business Today TV Managing Editor Siddharth Zarabi.   

Talking about savings in the new tax regime, Gupta said the notion that the government is doing away with savings and paying less attention to savings schemes is baseless. “From the taxation point of view, you don’t have to maintain any documents, filing of income tax returns is easier, all these are plus points under the new regime. From the administration's point of view, many people are misusing the tax exemptions offered. This under the new regime will be a thing of the past,” Gupta stressed.  

When asked about who benefits from the new tax regime, Gupta said that all sections will benefit in one way or the other. Giving examples, he said: “The lowest salary bracket will benefit. Till Rs 7 lakhs, there is no tax now. If he is a salaried individual, the amount becomes Rs 7.5 lakh. At Rs 15 lakh, our calculation shows that the tax payable is Rs 1.5 lakh. In all, the new tax regime is beneficial for the taxpayer.”  

After the Budget 2023 presentation, FM Sitharaman said: "This country has been waiting for direct taxation to be simplified. Therefore, the new taxation regime that we brought in for direct taxation two-three years ago has now got greater incentives...are greater attraction so that people can unhesitatingly move from the old to the new. We are not compelling anybody. Those who want to remain in Old can still remain there. But the new one is attractive because it gives a greater rebate. It also provides for simplified and smaller slabs, smaller lower rates of taxation, and also slabs which are nicely broken down. 

Talking about the regime change, Gupta said that the government has no plans to phase out the old tax regime as of now. “Old tax regime is untouched. We have modified the new regime, which would be beneficial for everyone, including those earning Rs 5-7 lakh. If salary is Rs 7 lakh and above, there is a standard deduction of Rs 50,000,” Gupta said.  

Highlights of the new tax regime

The Finance Ministry introduced its new income tax regime in the Budget 2020 in order to smoothen the process of taxpaying. The new regime offers reduced tax rates, with options to forego some deductions and exemptions during income tax calculations. After the tweaks this Budget, the tax rebate limit has been increased to Rs 7 lakh under the new tax regime. Under the old tax regime, the tax rebate limit is Rs 5 lakh.

So, people having income up to Rs 7.5 lakh (standard deduction of Rs 50,000) will not have to pay taxes in the new regime.

New Income tax Slabs (for new tax regime)

Rs 0-3 lakh - Nil
Rs 3-6 lakh - 5%
Rs 6-9 lakh - 10%
Rs 9-12 lakh - 15%
Rs 12-15 lakh - 20%
Above Rs 15 lakh - 30%

New Surcharge Rates (Only in NEW TAX REGIME) are as follows:

10% if Income is above 50 lacs and up to 1 crore

15% if income is above 1 crore and up to 2 crores
25% if income is above 2 crores and up to 5 crores,

25% (earlier it was 37%) if income is above 5 crores.