Budget

Published: Feb 2, 2023
Updated: Feb 2, 2023

Budget 2023: Choosing Between the Old and New Income Tax Regimes - Which One is Better for You?

The Budget 2023 presented by the Finance Minister has brought clarity to taxpayers by making the new income tax regime the default option. However, individuals will still have the option to choose the old tax regime if they wish to avail the benefits of various deductions and exemptions.

The Old Tax Regime

Under the old tax regime, individuals were allowed to claim various deductions and reduce their tax liability. This regime provided several exemptions and deductions, which made it attractive for many taxpayers.

The New Tax Regime

On the other hand, the new tax regime offers a lower tax rate but denies as many as 70 exemptions and deductions. This regime was introduced a couple of years back and has been a subject of debate for many individual taxpayers.

Choosing Between the Regimes

Both the tax regimes are optional for taxpayers, and one can evaluate their tax liability under both the regimes and accordingly select the one that is more beneficial. A salaried individual can switch between regimes  every financial year, while those with income from business or profession can only switch once in a lifetime.

Incentives for the New Regime

Vivek Jalan, Partner at Tax Connect Advisory, explains that the government's intention is clear that the new tax regime without exemptions will stay in the future. To further incentivize the new regime, the rebate under section 87A has been increased, income tax slabs have been increased, the highest surcharge has been reduced, and a standard deduction has been introduced for taxable income higher than Rs 15.5 lakh.

Weigh your option accordingly

In conclusion, taxpayers must weigh their options and choose the tax regime that is most beneficial to them. It is recommended that individuals take the time to evaluate their tax liability and make an informed decision based on their specific financial situation. The Budget 2023 presents an opportunity for taxpayers to make the most of their tax obligations and plan their finances effectively