New Income Tax Regime in India.

From FY 2020-21, you can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs. ‘Lower tax rates but no deductions/exemptions’ is the key feature. Provisions of the new tax regime is covered under section 115BAC of the Income-tax Act inserted by the Finance Act 2020.

The Budget 2020 introduces a new regime under section 115BAC giving individuals and HUF taxpayers an option to pay income tax at lower rates. The new system is applicable for income earned from 1 April 2020 (FY 2020-21), which relates to AY 2021-22.

The new income tax regime in Budget 2023 has made some changes to personal income tax rates and slabs. The basic exemption amount has been increased from Rs 2.5 lakh to Rs 3 lakh. The new tax regime is now the default tax regime. The maximum tax rate of personal income tax has come down to 39% from 42.74%. The limit of tax exemption on leave encashment on retirement of non-government salaried employees has been increased from ₹3 lakh to ₹25 lakh.Some exemptions like standard deduction etc too have been allowed as deduction in new regime. A tax rebate on an income up to ₹7 lakhs was introduced under the new tax regime. Therefore, a taxpayer with income up to ₹7 lakhs will not have to pay any tax at all if they opt for the new tax regime in the current FY.

Happy Tax Planning.

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