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Badalta Bharat : Old vs New Tax Regime in India




 Introduction:

The Union Budget 2023 has brought significant changes in the Indian taxation system by introducing a new tax regime for individuals and Hindu Undivided Families (HUFs). The new tax regime provides a lower tax rate for taxpayers who are willing to give up their exemptions and deductions. The old tax regime, on the other hand, continues to offer tax exemptions and deductions. In this blog, we will analyze the differences between the new tax regime and the old tax regime in the context of the Budget 2023.


New Tax Regime:

The new tax regime introduced in Budget 2023 offers lower tax rates to individual taxpayers and HUFs. Under the new tax regime, taxpayers can choose to forgo their exemptions and deductions and pay taxes at lower rates. The new tax regime has seven tax slabs ranging from 1% to 35%. The tax rates under the new regime are as follows:


Up to Rs 2.5 lakh: Nil

Rs 2.5 lakh to Rs 5 lakh: 1%

Rs 5 lakh to Rs 7.5 lakh: 5%

Rs 7.5 lakh to Rs 10 lakh: 10%

Rs 10 lakh to Rs 12.5 lakh: 15%

Rs 12.5 lakh to Rs 15 lakh: 20%

Above Rs 15 lakh: 35%

Under the new tax regime, taxpayers will not be eligible for exemptions such as standard deductions, house rent allowance, and deductions under sections 80C, 80D, and 80G.


Old Tax Regime:

The old tax regime continues to provide tax exemptions and deductions to individual taxpayers and HUFs. The old tax regime has four tax slabs ranging from 5% to 30%. The tax rates under the old regime are as follows:


Up to Rs 2.5 lakh: Nil

Rs 2.5 lakh to Rs 5 lakh: 5%

Rs 5 lakh to Rs 10 lakh: 20%

Above Rs 10 lakh: 30%

Under the old tax regime, taxpayers are eligible for exemptions such as standard deduction, house rent allowance, and deductions under section 80C, 80D, and 80G.


Comparison:

The new tax regime provides lower tax rates compared to the old tax regime. However, taxpayers will have to forgo their exemptions and deductions to avail of the lower tax rates. The decision to opt for the new tax regime or the old tax regime will depend on individual taxpayers' tax-saving strategies.


For example, if a taxpayer has significant deductions under section 80C, 80D, and 80G, it may be beneficial to opt for the old tax regime. However, if a taxpayer does not have many deductions and is willing to forgo the exemptions, the new tax regime may be more beneficial.


Conclusion:

The Budget 2023 has introduced a new tax regime that provides lower tax rates to taxpayers who are willing to give up their exemptions and deductions. The old tax regime continues to offer tax exemptions and deductions. The decision to opt for the new tax regime or the old tax regime will depend on individual taxpayers' tax-saving strategies. It is essential to evaluate the benefits and drawbacks of both regimes before making a decision.





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