What is New Tax Regime Slabs & Benefits | Section 115BAC

New Tax Regime under Section 115BAC was introduced in Budget 2020 to reduce Tax burden from individuals. We will see New Tax Regime Slabs, features and benefits, which is better between Old and New Tax Regime and few examples in this article.

New Tax Regime has multiple benefits including reduced tax slab rates, simple calculation of income tax (you can also use this online income tax calculator), same tax slab rates for all individuals irrespective of age groups, some exemptions and deductions allowed in new tax regime etc.

Budget 2023 Latest Updates for FY 2023-24 (New Tax Regime)

• Standard Deduction of Rs. 50,000 will be available with New Tax Regime also, from FY 2023-24. Not for FY 2022-23
• New Tax Regime will be default tax regime selected from FY 2023-24, you also have the option to choose Old Tax Regime
• Tax Rebate limit has been increased from Rs. 5 Lakh to Rs. 7 Lakh in New Tax Regime. Which means no income tax if your income is up to Rs. 7 Lakh with new tax regime
• Tax exemption limit with new tax regime is Rs. 3 lakh instead of Rs. 2.5 Lakh. Below are the new tax slabs for 2023-24 for all age groups:

New Tax Regime Slabs and Benefits Video 2022-23

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What is New Tax Regime u/s 115BAC?

New Tax Regime under Section 115BAC has reduced Tax slab rates compared to Old Tax Regime. It was introduced in Budget 2020 (applicable from FY 2020-21) to help us reduce our tax liability, with a condition that we have to forgo all deductions and investment options, except some of them that are discussed below.

Which means, unlike Old Tax Regime with high rates and deductions benefits, New Tax Regime will not provide you maximum of the benefits of deductions in case you want to make investments to reduce your taxable income. Moreover, even standard deduction of Rs. 50,000 available for salaried employees is not available under New Tax Regime for FY 2022-23.

From FY 2023-24, standard deduction of Rs. 50,000 will be available for salaried employees under New Tax Regime.

But individuals can enjoy the reduced tax slab rates compared to Old Tax Regime. For example, if your income is Rs. 7.5 Lakhs in financial year (Salaried employee) and you don’t have any deductions except Standard Deduction of Rs. 50,000, with Old Tax Regime your income tax will be Rs. 54,600 and with New Tax Regime your income tax will be Rs. 0, due to tax rebate under section 87A.

Which means you’ll save Rs. 54,600 just by opting for New Tax Regime in FY 2023-24.

You also have the option of choosing between Old and New Tax Regime. So based on your income tax calculation and in which regime you will pay less income tax, you can choose the Tax Regime based on your convenience.

We will check more examples below along with the answer to choose between Old vs New Tax Regime.

New Tax Regime Slabs FY 2023-24

New Tax Regime Slabs FY 2022-23

Let us now see the New Tax Regime Slabs:

• So based on your income tax bracket, your income tax will be calculated on above mentioned rates.
• Important: Above mentioned Tax Rates in New Tax Regime is applicable to all age groups – Non Senior citizens and Senior Citizens
• You cannot claim any deductions based on above New Tax Regime Slabs
• These rates are reduced tax slab rates compared to Old Tax Regime, rates for which are mentioned below

Old Tax Regime Slabs

Below is the table of Old Tax Regime Slabs for individuals below 60 years of age:

• As seen above, Old Tax regime slabs are higher compared to New Tax Regime Slabs
• Important: Tax Rebate under Section 87A is applicable for both Old and New Tax Regime, due to which you get tax rebate of maximum Rs. 12,500 if your taxable income is below Rs. 5,00,000

ALSO READ: How to Calculate Income Tax with both Tax Regime

Exemptions and Deductions not available in New Tax Regime

There are multiple deductions and exemptions not available under New Tax Regime:

• Investments included in Section 80C such as Provident Fund, Public Provident Fund, Life Insurance Premiums, 5 year Fixed Deposits, Equity Linked Saving Savings, etc. are not available in New Tax Regime
• NPS (National Pension Scheme) under Section 80CCD(1B) which allows maximum of Rs. 50,000 deduction is not available in New Tax Regime
• All other Deductions available under Chapter VI A is not available under New Tax Regime

Apart from these, there are some selected deductions available in New Tax Regime. Let us check them:

Exemptions and Deductions available in New Tax Regime

• Transport allowance can be claimed in case of specially-abled person
• Conveyance allowance for employees received to meet conveyance expenditures
• Compensation received for cost of travel or tour
• Daily Allowance received as compensation for cost of living in some other place compared to regular place of working
• Deduction for employer’s contribution in NPS Account under Section 80CCD(2)
• Home Loan Interest amount under Section 24 in case of let-out property
• Standard Deduction of Rs. 50,000 is available under New Tax Regime from FY 2023-24
• Deduction of amount paid or deposited in Agniveer Corpus Fund under Section 80CCH(2)
• Gifts up to Rs. 5000
• Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)

Choose between Old and New Tax Regime

For FY 2023-24, Read this Old vs New Tax Regime Article.

You have the option to choose between Old Tax Regime or New Tax Regime.

It is important to note that if you are a salaried employee, businessman or pensioner, you must assess your income tax calculation using both tax regime, and choose the one using which you will pay less income tax.

As you know, you’ll get deductions benefits only in Old Tax regime so your taxable income can be reduced to save income tax. You should take this benefit of saving income tax using various deduction options and see if you can pay less income tax with Old Tax Regime.

With new tax regime, your gross income will be your taxable income and hence it becomes difficult to save income tax, given that you will not get benefits of majority deduction options.

Watch below video to see comparison of Old Tax Regime vs New Tax Regime.

Old versus New Tax Regime Calculation Video

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Which is better New vs Old Tax Regime?

If you have watched above video on Old versus New Tax Regime calculation, we observed that Rs. 15 Lakhs is the income level on which you’ll pay almost same income tax in both tax regime, given that you make Rs. 2.5 Lakhs investments for deduction with Old Tax Regime.

Since New Tax Regime has reduced Tax Slab Rates, the income tax will be less on Rs. 15 Lakhs income, without any deductions benefits used.

So it depends on your income and investments you make, to choose between Old or New Tax Regime and which is better for you.

Thumb rule over here is if your income is above Rs. 15 Lakhs, you should go for New Tax Regime without making any investments, but if your income is below Rs. 15 Lakhs, you can take benefit of deduction options available and choose Old Tax Regime to save more income tax.

Below is the video on Income Tax Calculation.

Income Tax Calculation on Income between Rs. 4 Lakhs to Rs. 15 Lakhs

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At what Salary New Tax Regime is Beneficial?

There are multiple scenarios you have to consider during income tax calculation.

• If you don’t make investments in any tax saving options, you should opt for New Tax Regime as it has reduced tax slab rates
• If your income is close to Rs. 15 Lakhs in financial year and you want to make investments in tax saving options, you can make up to Rs. 2.5 Lakhs investments in Section 80C and NPS to save income tax with Old Tax Regime
• But if your income is above Rs. 15 Lakhs, it is better to choose New Tax Regime since you won’t be able to save much income tax with Old Tax Regime as you will hit the maximum limits of investments in various options while seeking to save income tax.

For Income of Rs. 15 Lakhs, and Rs. 2.5 Lakhs deductions using Standard Deduction, Section 80C and NPS, below is the income Tax with Old and New Tax Regime:

• Income Tax with Old Tax Regime = Rs. 195000
• Income Tax with New Tax Regime = Rs. 195000

So as seen, your income tax is same with Rs. 15 Lakhs income and Rs. 2.5 Lakhs deductions with Old and New Tax Regime.

Any income above this level should make you select New Tax Regime, and any income below Rs. 15 Lakhs should make you invest in tax saving options and choose Old Tax Regime.

Is there 50000 Standard Deduction in New Tax Regime?

No. Standard Deduction of Rs. 50,000 is not available in New Tax Regime. It is only available to Salaried employees and pensioners under Old Tax Regime.

Example – Which Tax Regime is better for 7.5 Lakhs?

For income of Rs. 7.5 Lakhs, we’ll take 2 scenarios with standard deduction available:

1. With Investments = Rs. 1.5 Lakhs under Section 80C
2. Without any investments

With Investments = Rs. 1.5 Lakhs under Section 80C

As seen in above image, you’ll pay less income tax with Old Tax Regime (Rs. 23,400) with investments, compared to New Tax Regime (Rs. 39,000).

Let’s see calculation without any investments.

Without any Investments

So without any investments, you’ll pay less income tax with New Tax Regime (Rs. 39,000) compared to Old Tax Regime (Rs. 54,600).

Please note that we have included Standard Deduction of Rs. 50,000 in both scenarios for Old Tax Regime tax calculation.

You can use the online income tax calculator from here:

Is 80C available in New Tax Regime?

No. Section 80C investment options are not available in New Tax Regime. It is only available in old tax regime with maximum limit of Rs. 1.5 Lakhs in financial year.

How to change from New Tax Regime to Old Tax Regime or vice versa?

If you have already chosen tax regime at the start of the financial year and informed your employer, you cannot change it during the year.

The only option to change from new tax regime to old tax regime or vice versa is to do it while filing your ITR (Income Tax Return)

Conclusion

We have seen New Tax Regime Slabs, along with examples with calculations on which one is better between Old and New Tax Regime.

Rs. 15 Lakhs is the income level that will help you to decide between Old and New Tax Regime. If our income is above Rs. 15 Lakhs, choose New Tax Regime due to it’s reduced Tax slab rates, else if your income is below Rs. 15 Lakhs, choose Old Tax Regime and make up to Rs. 2.5 Lakhs investments in tax saving options.

Also, you can change the tax regime you have chosen at the start of the financial year as a salaried employee. You can select the Tax regime while filing ITR based on your tax calculations and you’ll get the tax refund if applicable.

Some more Reading:

• Section 80C Deductions List
• How to Calculate Income Tax on Payslip
• Short Term Capital Gains Taxation
• Income Tax Calculator Excel Download
• 6 Tax Saving Options to save income tax

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Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

What you can do with this mobile App?

• Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
• Enter estimated Investments to check income tax with Old and New Tax Regime
• Save income tax details and track regularly
• Know how much to invest more to save income tax
• More calculators including PPF, SIP returns, Savings account interest and lot more

Use Popular Calculators:

• Income Tax Calculator
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