Home > Income Tax > Help Center > New Tax Regime Last Updated: Oct 06th 2024
Old vs New Tax Regime | Explained for Salaried & Business Taxpayers
Budget 2020 has announced a New Tax Regime (aka Alternate Tax Regime) u/s 115BAC which is applicable from FY 2020-21 (AY 2021-22). All individuals and HUF have an option to choose between Old regime (regular) or New regime depending upon their Income and Investments. What's different to the common belief is that it applies to both Salaried and Business taxpayers.
Know more on the Choice, Benefits, and the Limitations.
This document covers
- Tax Rates under New Tax Regime.
- Deductions / Exemptions not available under New Tax Regime (Other than Business).
- Deductions / Exemptions not available under New Tax Regime (Business).
- Time Limit for exercise of Option under New Regime.
- How New Tax Regime affects TDS on Salaries?.
- Forms required to be filed for opting New Tax Regime.
- Restrictions on Carry Forward Losses.
- Frequently Asked Questions
1. Tax Rates under New Tax Regime
The taxpayers are required to pay tax at concessional rates under New Tax regime (u/s 115BAC). The concessional tax rates under New Regime are as follows. If you want to know the difference between Old vs New Tax Regimes, refer Difference between Old Tax Regime and New Tax Regime
From FY 2024-25 onwards
NEW * per latest Budget 2024 on Jul 23rd 2024| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 3,00,000 | Nil |
| 2 | From Rs 3,00,001 to Rs 7,00,000 | 5% |
| 3 | From Rs 7,00,001 to Rs 10,00,000 | 10% |
| 4 | From Rs 10,00,001 to Rs 12,00,000 | 15% |
| 5 | From Rs 12,00,001 to Rs 15,00,000 | 20% |
| 6 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
For FY 2023-24
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 3,00,000 | Nil |
| 2 | From Rs 3,00,001 to Rs 6,00,000 | 5% |
| 3 | From Rs 6,00,001 to Rs 9,00,000 | 10% |
| 4 | From Rs 9,00,001 to Rs 12,00,000 | 15% |
| 5 | From Rs 12,00,001 to Rs 15,00,000 | 20% |
| 6 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
From FY 2020-21 to FY 2022-23
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 2,50,000 | Nil |
| 2 | From Rs 2,50,001 to Rs 5,00,000 | 5% |
| 3 | From Rs 5,00,001 to Rs 7,50,000 | 10% |
| 4 | From Rs 7,50,001 to Rs 10,00,000 | 15% |
| 5 | From Rs 10,00,001 to Rs 12,50,000 | 20% |
| 6 | From Rs 12,50,001 to Rs 15,00,000 | 25% |
| 7 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
Marginal Relief has been introduced in New Tax Regime w.e.f FY 2023-24.Marginal Relief under New tax Regime means the tax payable should not exceed the income that exceeds Rs 7 lakhs.
For Example: Mr Ram has a net taxable income of Rs 715000 for FY 2023-24. He wants to opt for New Tax Regime. In this case, he is not eligible for rebate u/s 87A as his income exceeded Rs 7 lakhs. He is required to pay a tax of 26500(excluding Edu cess) . In this case, the income exceeding Rs 7 lakhs (7,15,000-7,00,000=15000) is less than the tax payable of Rs 26500. Hence the marginal relief is applicable on his taxes payable for FY 2023-24
After applying marginal relief, his tax payable is 15000 (excluding educ.cess) which we will be a benefit to Mr Ram
Quick Fact
- When filing through EZTax.in the system will auto calculate both Old and New Tax Regime calculations for you to choose with the maximum refund eligible tax regime to eFile your IT Return.
- Refer Income Tax Help Center for more information or when you are working in the EZTax.in IT Filing Service, go to "Summary" Page to see the comparison. while realtime calculation is available at the top of the screen.
Income Tax Calculator (FY 2023-24)
For additional Tax Calculators, visit EZTax.in IT Help Center
2. Deductions / Exemptions not available under New Tax Regime (Other than Business)
If the taxpayer wants to opt for New Regime, certain deductions/exemptions would not be allowed. Following are the deductions/exemptions not available for taxpayers opting for new regime.
- 10(13A) – House Rent Allowance
- 10(5)- Leave Travel Concession
- 10(14)- Allowances to meet expenses relating to duties or personal expenses
- 10(16)- Standard Deduction, Professional Tax and Entertainment Allowance
- 10(17)- Daily Allowance or constituency allowance of MP’s and MLA’s
- 10(32)- Exemption in respect of income of minor child included in the parent
- 24(b)- Interest on Housing Loan
- 57(iia) - Rs 15000 or 1/3rd of family pension can be allowed as deduction
- 80C to 80U except employer contribution to NPS u/s 80CCD (2)
- Free or concessional food and non-alcoholic beverages through paid vouchers and usable only at eating joints
NOTE on Family Pension:
Starting from FY 2024-25, Family pension deduction of Rs 25,000 or 1/3rd of pension whichever is less is allowed as deduction under New Tax Regime also. For FY 2023-24, the maximum allowed was Rs. 15,000. Upto FY 2022-23, this deduction is allowed only under Old Tax Regime.
3. Deductions / Exemptions not available under New Tax Regime (Business)
Following are the deductions /exemptions not available under New Tax Regime for the taxpayers who are filing returns under Business
- 32(1) (iia)- Additional Depreciation
- 33AB-Tea/Coffee/Rubber development account
- 33ABA- Site Restoration fund
- 35(1)(ii), (iia), (iii) or 35(2AA)- Deduction in respect of contribution to notified universities/research associations.
- 35AD-Investment linked tax incentives for specified business.
- 35CCC- Deduction in respect of expenditure incurred on notified agriculture project.
4. Time Limit for exercise of Option under New Regime
While the general understanding from the Finance Ministry is that over the time, the department may sunset the old regime for good, the restrictions defined may confuse the taxpayers. Below is an effort to explain when to switch and the limitations.
4.1 Individual / HUF with NO Business / Profession Income:
If the individual has no business income, then the Individual / HUF can switch between the old and new over the years. The option has to be exercised on or before due date (even during the IT Filing time as long as it is before the due date) of filing Income Tax Return4.2 Individual / HUF with Business Income:
The option of New Regime has to be exercised on or before due date of filing Income Tax Return and it would apply to subsequent assessment years once exercised. The option can be withdrawn only once and the Individual / HUF shall never be able to exercise option under this scheme again, except where such Individual or HUF ceases to have any business income.
As on 3rd Mar 2022, govt. is mulling to sunset the Old Tax Regime to strengthen the new tax regime and to reduce the compliance burden on taxpayers to plan and manage.
As on 1st Feb 2023, part of Budget 2023, govt. has given clear direction to eventually sunset the old tax regime and has made "new tax regime" a default when filing taxes in India. EZTax team has predicted this few years ago and was articulated in budget expectations for last 2+ years.
Hence decisions like home loan for the purpose of getting the tax saving would be discouraged unless you see other benefits of owning a home such as pride, confidence, and material benefit from rent vs buy comparison.
5. How New Tax Regime affects TDS on Salaries?
- The Taxpayers having income other than business income should disclose their intention to opt for new regime u/s 11BAC to their respective employers.
- If no declaration is made by the employee for opting new regime, the employer will deduct the taxes under Old Regime.
- The declaration made by the employee cannot be modified during the same year. It will be valid throughout the year.
- The declaration made to employer cannot be treated as exercise of New Tax Regime options.
- The option at the time of filing of Income tax return can be different from declaration made to employer.
Quick Fact
- Declaration of Old or New Tax Regime to your employer and / or a tax consultant during the year is mainly to withhold the TDS appropriately.
You have a choice to select Old or New Tax Regime at the time of IT Filing.
6. Forms required to be filed for opting New Tax Regime
CBDT has notified Form 10-IE. An Individual / HUF are required to fill and submit form 10-IE at the time of filing Income Tax Return if they want to opt for new regime for a particular financial year. The due date for submission of form 10-IE is same as filing income tax return i.e., July 31 unless extended.
The information in the Form 10-IE are already available part of the return and IT Return is a fact and having this form to be uploaded in addition to the IT Filing may add additional burden.
We @ EZTax.in assume that this requirement may be dropped soon and the ITD part of their new data exchange schema provide a facility for such as an additional questionnaire. If no such thoughts, we request the ITD to consider such measure to ease the process of filing.
Starting from FY 2023-24, New Tax Regime is the default Tax Regime for all the taxpayers.
Taxpayer may select any tax regime at the time of IT Filing.
The taxpayer filing ITR 3 and ITR 4 (who are having business) are required to file Form 10-IEA to opt-out of New Tax Regime.
However Form 10-IEA must be filed on or before the due date of Income Tax Return filing.
6a. More on Form 10-IE?
Refer Form 10-IE for Opting New Tax Regime, and to know the information needed to file.
6b. How to download Paper Copy of Form 10-IE?
While the Form 10-IE is available Online, you may refer to Department announced Form 10-IE for different reasons and where Online form may not be possible to fill.
6c. More on Form 10-IEA?
Refer Form 10-IE for Opting New Tax Regime, and to know the information needed to file.
6d. How to download Paper Copy of Form 10-IEA?
While the Form 10-IEA is available Online, you may refer to Department announced Form 10-IEA for different reasons and where Online form may not be possible to fill.
7. Restrictions on Carry Forward Losses
Under New Tax Regime, certain losses are not allowed to be set off or carry forward. Following losses are not allowed.
- Set off of any loss under the head house property with any other head of income.
- Set off of any loss, carry forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to deductions / exemptions not available under new regime (mentioned above).
8. Frequently Asked Questions
No, the concessional rates under New Regime does not apply to incomes chargeable at special rates.
Until FY 2022-23(AY 2023-24): Yes, the rebate of Rs 12500 u/s 87A applicable to taxpayers whose Net Taxable income is less than Rs 5 Lakhs under Old Regime and New Regime
From FY 2023-24 (AY 2024-25): The rebate u/s 87A under New Tax Regime was increased to Rs 25000 for the taxpayers whose net taxable income is less than Rs 7 lakhs and the rebate u/s 87A under Old tax regime remains constant i.e., Rs 12500 for the taxpayers whose net taxable income is less than Rs 5 lakhs
If your Income does not have Business/Profession Income, you can change the Tax Regime every year,
No, the declaration made to employer cannot be changed in the same financial year.
Filing form 10-IE within due date is mandatory to opt concessional tax rates under New Tax Regime. If Form 10-IE is not filed, the Income tax department will disallow the concessional rates and calculate the taxes under Old Tax Regime.