The Finance Ministry affirmed on Monday that there would be no alterations to the new income tax regime for individuals in the ongoing fiscal year. Individual taxpayers retain the option to opt out of the regime during the filing of their Income Tax Returns (ITR).
Addressing concerns arising from social media posts regarding purported changes in the tax regime effective April 1, the ministry clarified, “There is no new change which is coming in from 01.04.2024.” The modified new income tax regime, introduced from the financial year commencing April 1, 2023, offers significantly reduced tax rates.
However, under this new regime, the benefit of various exemptions and deductions (apart from standard deductions of Rs 50,000 from salary and Rs 15,000 from family pension) is not available, unlike in the old regime.
“The new tax regime is the default tax regime. However, taxpayers can choose the tax regime (old or new) that they deem beneficial… The option for opting out from the new tax regime is available until the filing of the return for the Assessment Year 2024-25,” stated the ministry.
Under the new Income Tax (I-T) regime, income up to Rs 3 lakh is exempt from tax. Tax rates of 5%, 10%, 15%, 20%, and 30% are applicable to income brackets between Rs 3-6 lakh, Rs 6-9 lakh, Rs 9-12 lakh, Rs 12-15 lakh, and above Rs 15 lakh, respectively.
The new tax regime was established as the “default regime” starting from 2023-24, with the Assessment Year corresponding to this being AY 2024-25. Taxpayers have the flexibility to switch regimes at the time of filing their Income Tax Returns (ITR).
Individuals eligible for the new regime, devoid of business income, have the liberty to select their preferred regime for each financial year. They can opt for the new tax regime in one fiscal year and revert to the old regime in another, and vice versa, the ministry explained in a statement.
The existing tax regime, still in effect, offers an array of deductions and exemptions. Under this regime, income up to Rs 2.5 lakh remains exempt from taxes, while income brackets between Rs 2.5-5 lakh and Rs 5-10 lakh attract tax rates of 5% and 20%, respectively. Income exceeding Rs 10 lakh is subjected to a 30% tax rate.
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