Old vs new tax regime income tax easy guide for 2023-24

Old vs new tax regime income tax easy guide for 2023-24 – This article is detailed guide on new income tax regime. A detailed comparison is drawn below between old and new tax regime. Do not miss the ending where a expert tip is given to salaried employees on how to decide to opt in for new regime or not.

Sources of this blog is CBDT Website. Refer link >> https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx

What is new tax regime ?

New tax regime is governed by newly inserted section 115BAC by Finance Act, 2020 with effect from AY 2021-22.  

The new tax regime is only applicable for Individuals and Hindu Undivided Family (HUF). From FY 2023-24 the new tax regime is default tax regime for Individual, HUF, Association of Person (except cooperative societies), Body of Individuals, Artificial Judicial Person.

The taxpayers had the option to avail for the tax regime from AY 2021-22 to AY 2023-24. From FY 2023-24 the persons has the option to pay tax as per old slab rates if they fill a form.

The taxpayer can opt in while return filing u/s 139(1). He can also opt out but after that he would not be able to opt in again. 

The new tax regime (Also default tax regime from FY 2023-24) has certain conditions defined below which needs to be complied.

What are the conditions for section 115BAC?

Section 115BAC has following conditions which should be complied with and the following line items should not be considered as part of total income of taxpayer :-

1. No exemption/deductions can be claimed under following sections :-
   • Section 10
     • Clause 5 – Travel concession provided by employer to his employee & family to settle in another place in India during service or after retirement
     • Clause 13A – House rent allowance
     • Clause 14 – Special allowances reimbursed to meet office related expenses or allowances to meet personal expenditure or to compensate increased cost of living
     • Clause 17 – payments made in cash or kind being reward from CG/SG
     • Clause 32 – deduction of 1500 per minor child in case where clubbing provisions attract
   • Section 10AA – deductions to units established in SEZs
   • Section 16 –
     • standard deduction of 50,000 from salary income,
     • deduction of professional taxes paid and
     • For government employees in respect of entertainment allowance, a deduction of 1/5 of salary or INR 5000 , whichever is less
   • Section 24 clause (b) – Interest on housing loan
   • Section 32 Sub section (1) clause (iia) – depreciation on block of asset as per WDV method
   • Section 32AD – Investments in new plant and machinery in backward area
   • Section 33AB – Deduction is respect of tea development, coffee development and rubber development
   • Section 33ABA – Site restoration fund
   • Section 35
     • Sub Section (1) sub clause (ii) – Expenditure on scientific research paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research
     • Sub Section (1) sub clause (iia) – any sum paid to a company to be used by it for scientific research
     • Sub Section (1) sub clause (iii) – research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research
     • Sub Section (2AA) – any sum to a National Laboratory or a University or an Indian Institute of Technology or a specified person with a specific direction that the said sum shall be used for scientific research undertaken under a program approved in this behalf by the prescribed authority
   • Section 35AD – Deduction in respect of expenditure on specified business
   • Section 35CCC – Expenditure on agricultural extension project
   • Section 57 Clause (iia) – the deduction to employers in respect of depositing contribution of employee (to any provident fund or superannuation fund or any fund) on or before due date.
   • All the provisions of Chapter VIA Deductions ( Other than Section 80CCD sub-section 2, Section 80CCH sub-section 2 and Section 80JJAA)
2. Without set off of any :-
   • Losses or depreciation pertaining to any of the category mentioned in point no. 1 above
     • carried forward losses
     • depreciation from earlier years
   • Set off of any loss under the head “Income from house property” with any other head of income
3. Normal depreciation under section 32 can be claimed except Sub section (1) clause (iia) (as same has been included in point 1 above)
4. Without exemption of any allowance or perquisite

Old Regime Tax slab rates for FY 2022-23 & Onwards

New Regime Tax slab rates for FY 2022-23

New Regime Tax slab rates for FY 2023-24 (DEFAULT REGIME)

How to decide whether STAY in new tax regime or opt out out it – Old vs new tax regime income tax easy guide for 2023-24

The answer to above question will vary on case to case basis. However, following few points on the basis of which Assessee can decide :-

1. If you have Housing Loan Interest + Section 80C deduction – 1,50,000 + Section 80D – 25,000 + HRA + Special Allowance then in most of the cases it would be beneficial to stay in the old regime itself.
2. If no housing loan interest and only Section 80C deduction – 1,50,000 + Section 80D – 25,000 + HRA + Special Allowance then in most of the cases it would be beneficial to opt in for the new regime.
3. If only Section 80C deduction – 1,50,000 + Section 80D – 25,000 + Special allowances deductions with no HRA then in most most of the cases it would be beneficial to opt in for the new regime.
4. If only Section 80C deduction – 1,50,000 + Section 80D – 25,000 with no HRA then in most most of the cases it would be beneficial to opt in for the new regime.

Confused on whether to choose old or new tax regime. Reach out to our experts at TaxLedgerAdvisor. Refer blog – Old vs new tax regime income tax easy guide for 2023-24

For expert assistance on whether to choose old or new tax regime. Reach out to our experts at TaxLedgerAdvisor. Refer blog – Old vs new tax regime income tax easy guide for 2023-24.

For Salaried taxpayers other important blogs >> https://www.taxledgeradvisor.com/salaried-tax-filing/ https://www.taxledgeradvisor.com/itr-1/

FAQs – Old vs new tax regime income tax easy guide for 2023-24

Which is better to choose old or new tax regime?

The answer to above question will vary on case to case basis. However, following few points on the basis of which Assessee can decide :-

1. If you have Housing Loan Interest + Section 80C deduction – 1,50,000 + Section 80D – 25,000 + HRA + Special Allowance then in most of the cases it would be beneficial to stay in the old regime itself.
2. If no housing loan interest and only Section 80C deduction – 1,50,000 + Section 80D – 25,000 + HRA + Special Allowance then in most of the cases it would be beneficial to opt in for the new regime.
3. If only Section 80C deduction – 1,50,000 + Section 80D – 25,000 + Special allowances deductions with no HRA then in most most of the cases it would be beneficial to opt in for the new regime.
4. If only Section 80C deduction – 1,50,000 + Section 80D – 25,000 with no HRA then in most most of the cases it would be beneficial to opt in for the new regime.

What is the difference between old and new tax scheme?

What is the disadvantage of new tax regime?

Following are disadvantages of new tax regime:

1. No standard deduction of 50,000 to salaried employees
2. No Chapter VI A deduction available
3. No Housing Loan Interest allowed
4. Set off losses not allowed

Which tax regime is better old or new for 15 lakhs?

For Income of 15 lakh, If no housing loan interest and only Section 80C deduction – 1,50,000 + Section 80D – 25,000 + HRA + Special Allowance then in most of the cases it would be beneficial to opt in for the new regime.

What are the new income tax slabs for 2023 to 2024 under old tax regime?

Old Regime Tax slab rates for FY 2022-23 & Onwards

What is the new IT slab for 2023?

Old Regime Tax slab rates for FY 2023-24 if specifically opted for paying as Old slab rates

Old vs new regime calculator

Refer link from CBDT website >> https://incometaxindia.gov.in/Pages/Tax-calculators.aspx

DROP COMMENTS BELOW FOR FUTHER QUESTIONS.