Income Tax Regime Clarifications: Essential Insights

The Ministry of Finance has clarified through a recent announcement that there are no alterations to the income tax slabs starting April 1, 2024, contrary to some misleading claims circulating on various social media outlets. The clarification comes in light of rumors suggesting changes to the tax regime. The Ministry emphasizes the continuity of the choice between the existing old and the newly introduced tax regimes, offering taxpayers the flexibility to select the regime that best suits their financial needs and situation. This choice is available until the time of submitting returns for the Assessment Year 2024-25. Furthermore, individuals without business income have the privilege to switch between the old and new regimes annually.

According to the Finance Ministry’s statement on social media, the intention is to correct the spread of inaccurate information about the income tax regime. Key points highlighted include:

• No fresh changes in the tax regime from April 1, 2024.
• Introduction of the new tax regime under section 115BAC(1A) in the Finance Act 2023, alongside the existing old regime.
• The new tax regime, meant for individuals and HUFs (not companies or firms), becomes the default option from the Financial Year 2023-24, corresponding to Assessment Year 2024-25.
• Although the new regime offers lower tax rates, it does not allow for several exemptions and deductions available under the old regime, except for a standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension.
• Taxpayers retain the freedom to choose between the old and new tax regimes, with the option to revert from the new regime available until the return filing for Assessment Year 2024-25.
• Eligible individuals can alternate their choice of tax regime each financial year, allowing for flexibility between the new and old regimes.

The new tax regime outlines the following slabs:

• No tax for income up to ?3,00,000.
• A 5% tax rate for income between ?3,00,001 and ?6,00,000.
• A 10% tax for income between ?6,00,001 and ?9,00,000.
• A 15% tax rate applies to income between ?9,00,001 and ?12,00,000.
• For income between ?12,00,001 and ?15,00,000, the tax rate is 20%.
• A 30% tax rate for income exceeding ?15,00,000.

In contrast, the old regime’s tax slabs are as follows:

• No tax for income up to ?2.5 lakh.
• A 5% tax rate for income between ?2.5 lakh and ?5 lakh.
• A 20% tax rate for income between ?5 lakh and ?10 lakh.
• A 30% tax rate for income above ?10 lakh.

In comparison, the old regime’s tax slabs start with an exemption for income up to ?2.5 lakh and incrementally increase the tax rate for higher income brackets, culminating in a 30% tax rate for incomes above ?10 lakh.

Flexibility for Taxpayers

A notable feature of the new tax regime is the flexibility it offers to taxpayers, particularly those without business income. They have the liberty to switch between the old and new regimes from one financial year to another until the filing deadline for the Assessment Year 2024-25. This flexibility ensures that taxpayers can make informed decisions based on their financial changes and planning for each year.

This clarification aims to ensure taxpayers are well-informed about their options and the specifics of the tax regimes available to them.

Summing up, The Finance Ministry’s clarification comes as a relief to many who were unsettled by the rumors of new tax changes. With the options clearly laid out, individuals can navigate their tax planning with a better understanding of the implications of each regime. The ministry’s initiative to dispel misinformation and provide clear guidelines helps taxpayers make informed decisions, ensuring they can optimize their financial planning and tax obligations effectively.

For more news like this visit NOTIFIRE. Get all the Latest News, Tech News, Education News, Business News, and Sports News. For Entertainment News, Automobile News, and Web Story visit Notifire.in

Visit: Home | Ministry of Finance | Government of India (finmin.nic.in)