Finance Minister Nirmala Sitharaman in her budget speech said that from financial year 2023-24, the new regime is set to be the default tax system.
The new tax regime is touted to be a simpler, less-cumbersome-paperwork alternative to the old tax regime.
Not all taxpayers are eligible for this benefit. The benefits are restricted to salaried employees and pensioners. Businesspersons or self-employed professionals cannot avail of the tax break.
The Centre introduced a standard deduction of Rs 50,000, which can be claimed on salary and pension.
This is available for both regimes. The proposed new tax regime allows a salaried individual to claim the benefit of standard deduction of Rs 50,000.
For family pensioners, a standard deduction of Rs 15,000 will be available under the new tax regime.
The employer contributes 12 per cent of your basic salary to your employees’ provident fund (EPF) account. This is exempted from tax.
Budget 2023 has proposed that any amount paid or deposited to the Agniveer Corpus Fund under the newly proposed section 80CCH of the Income-tax Act can be claimed as a deduction.
Investments up to Rs 1.5 lakh made in the public provident fund (PPF) and Sukanya Samriddhi Yojana are not taxable.
The old tax regime had a higher tax rate but provided exemptions. Under the old tax regime, individuals can save income tax via various deductions and tax exemptions, Sections 80C, 80D, 80CCD(1b), 80TTA, HRA, and LTA.
The official tax calculator launched by the Income Tax department is a handy guide for individuals to choose the regime with lower tax liability.