Amidst circulating misinformation on social media platforms regarding income tax rules, the Ministry of Finance has issued a clarification. The government stated that there have been no new changes to income tax regulations coming into effect from April 1.
In response to misleading information, the Ministry of Finance released a detailed statement, emphasizing that the new tax regime is applicable to individuals other than companies and firms. This default regime will apply from the financial year 2023-24, with the corresponding assessment year being AY 2024-25.
The statement highlights that under the new tax regime, tax rates are notably lower. However, it also mentions that various exemptions and deductions, apart from the standard deductions, are not available as in the old tax regime.
Despite the default nature of the new tax regime, taxpayers retain the option to choose the regime that best suits their financial circumstances. They can make this choice until filing the return for the assessment year 2024-25.
Eligible individuals without business income can opt for either regime each financial year. This flexibility allows them to select the new tax regime in one financial year and switch to the old regime in another, and vice versa.
New vs. Old Income Tax Regimes
With the commencement of the new financial year, taxpayers face the decision of sticking to the old regime or transitioning to the new one.
The old regime permits numerous deductions and exemptions under various sections, such as 80C, 80D, HRA, and LTA. However, it entails a more complex structure with higher tax slabs in certain brackets.
In contrast, the new regime offers lower tax rates while eliminating most deductions and exemptions. While simplifying the filing process, it may not cater to everyone’s financial needs.
Under the new tax regime, individuals earning up to Rs 7.5 lakh are exempt from taxes, providing a significant advantage. Additionally, those with incomes up to Rs 10 lakh and no investments can benefit from the lower tax slabs offered by this system.
In conclusion, taxpayers are urged to carefully assess their financial situations and consider the implications of both tax regimes before making an informed decision.
