Taxation under New Regime introduced in Budget 2023.

 

The New tax regime was first introduced in Budget 2020 through enactment of new Section 115BAC, which was amended through Budget 2023.

 In this article below Points will be discussed:

Ø  Applicability.

Ø  Tax slab Rate (New V/s Old Regime).

Ø  Rebate u/s 87A in New regime.

Ø  Conditions/ Restrictions in New Regime.

Ø  How to opt New Regime.

 

 Applicability:  

 With effect from the 1st day of April 2023, Individual, HUF, AOP, BOI or Artificial juridical person have an option either to tax under the old regime which offers various deductions and exemptions or to taxed under new regime while new tax regime offers lower rate of tax, it has limited deductions available.

 Tax Slab Rate (New V/s Old Regime):

Below are the tax slab comparison between old regime and new regime: 

Total income	Old Regime	New Regime
Upto Rs. 2,50,000	Nil.	Nil.
From Rs. 2,50,000 to Rs.3,00,000	5 per cent.	Nil.
From 3,00,001 to 5,00,000	5 per cent.	5 per cent.
From 5,00,001 to 6,00,000	20 per cent.	5 per cent.
From 6,00,001 to 7,50,000	20 per cent.	10 per cent.
From 7,50,001 to 9,00,000	20 per cent.	10 per cent.
From 9,00,001 to 10,00,000	20 per cent.	15 per cent.
From 10,00,001 to 12,00,000	30 per cent.	15 per cent.
From 12,00,001 to 15,00,000	30 per cent.	20 per cent.
Above 15,00,000	30 per cent.	30 per cent.

 

Rebate in case of Individual under Section 87A:

A new Proviso has been inserted u/s 87A which states that Where income has been computed u/s 115BAC whose total income does not exceed Rs. 700,000, shall be entitled to a deduction, from the amount of income-tax, of an amount equal to 100% of such income-tax or an amount of Rs.25,000 whichever is less. 

Conditions/ Restrictions in New Regime:

 Below are the deductions and exemptions head wise which would not be available in New Tax regime:

SALARY HEAD	Entertainment Allowance u/s 16 (ii)
	Professional Tax u/s 16(iii)
	Leave Travel Concession u/s 10(5)
	HRA u/s 10(13A)
	Official and personal allowances Mentioned u/s 10(14) *
HOUSE PROPERTY HEAD	Interest Deduction u/s 24(b) for Self-Occupied Property
OTHER SOURCE HEAD	Allowances for income of minor u/s 10(32)
	Allowances to MPs/MLAs u/s 10 (17)
	Deduction for family Pension u/s 57(iia)
PROFIT AND GAIN FROM B/P	Additional depreciation u/s 32 (1)(iia)
	Deduction for investment in new plant and machinery u/s 32AD
	Deduction in respect of tea, coffee, or rubber business u/s 33AB
	Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India u/s 33ABA
	Deduction for units in Special Economic Zones u/s 10AA
	Deduction for donation made for Scientific research/social science or statistical research u/s 35(1)- (ii),(iia),(iii).
	Deduction for donation made for or expenditure on scientific research u/s 35(2AA)
	Deduction in respect of capital expenditure incurred in respect of certain specified businesses u/s 35AD.
	Deduction for expenditure on agriculture extension project u/s 35CCC
DEDUCTIONS	Ch VI A Deduction**
SET OFF & CARRY FORWARD	No set off of any loss, carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred above.
	House Property Loss from other heads.

* Below four allowances are allowable to the person opting for 115BAC:

·       Travelling Allowance

·       Daily Diem Allowance

·       Conveyance Allowance

·       Transport Allowance

 

** Below three deductions are allowable to the person opting for 115BAC:

·       Deduction for additional employee cost u/s 80JJAA

·       Employer’s contribution to the NPS u/s 80CCD (2)

·       Deduction in respect of contribution to Agnipath Scheme u/s 80CCH 

It can be seen above that, in the new updated regime introduced via Finance Bill 2023, there is no restriction on an individual u/s 16 to claim a standard deduction of Rs. 50,000 under the Salary head.

How to opt New Regime:

      ·        One can opt for New Regime by filling form No. 10-IE.

·       A Person Having no Business Income can exercise such option every year while filling the return of income under sub-section (1) of section 139 for such assessment year.

·       A Person Having Business Income can exercise such option on or before the due date specified under sub1] section (1) of section 139 for furnishing the return of income for such assessment year. Also, option once opted can have a once in a lifetime option to switching back to old regime, except where such person ceases to have any income from business or profession in respective assessment year.

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