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@Evening: 📝 Let's Talk New Tax Regime; What You Need To Know
✅ Mostly pros, and a few cons
You already know the basics, and more, of the new income tax regime, including the slabs and rates. R Jagannathan takes a closer look and tells us what's good and what would have been better.
Key changes. The changes to tax rates and basic exemptions relate to assessment year 2024-25. That's the financial year starting 1 April 2023.
The obvious change is the removal of the old 25 per cent rate applied to the Rs 12.5-15 lakh slab.
Introduction of a Rs 50,000 standard deduction makes the new regime similar to the old one, which remains an option for taxpayers.
A rebate is available to taxpayers earning up to Rs 7 lakh, which means the new effective tax-free income is Rs 7.5 lakh, including the standard deduction.
Implications... the pluses.
Since all deductions under 80C, 80D, and 80 TTA are gone, it now implies that your deductions for contributions to provident fund and the national pension scheme are gone.
You no longer have to invest in mutual funds or insurance just for tax deductions. You now have the option to opt for much cheaper term insurance as against the higher-premium money-back policies that are essentially part-insurance, part-mutual fund.
Tax filing is simple. All you need to do is, enter your gross salary figure, add your returns from interest and dividends and other incomes, check your TDS credits under AS26 statements, and pay the advance or balance tax.
You get more discretionary money under the new regime even when you pay more taxes in the higher income slabs.
Implications... the misses.
The much-anticipated reforms with capital gains could have been attempted early in the new regime while retaining the old one for those who benefit from it.
This would have also allowed the government to do a pilot before plunging into wholesale changes to the capital gains regime.
Plus: The 25 per cent tax rate could have been retained for the Rs 15-18 lakh slab, thus encouraging more people to opt for the new regime.
Overall: The new regime is a gamechanger, both for compliance and as a cure against individual addiction to specific tax deductions.
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