“Now, I come to what everyone is waiting for – personal income tax. I have five major announcements to make in this regard. These primarily benefit our hard-working middle class. We are also making the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the
benefit of the old tax regime.” - Nirmala Sitharaman said during the Budget 2023 Speech.
These words by the FM clearly are favorable towards the new tax regime! The government is giving taxpayers an option to choose between long-term and short-term priorities by giving them the option to choose between regimes.
However, both regimes have their pros and cons. The old regime inculcates a habit of investing in a taxpayer. In contrast, the new taxation regime is better for employees who wish for a simpler, hassle-free tax regime with minimal compliance burden.
Let’s understand these words in a bit of depth.
- What are the 5 major announcements? Read about them: Highlights of the Budget 2023-24
- Next, the new regime shall be the default regime. This means taxpayers will have to choose the old regime if they wish to opt for the same from FY 2023-24 onwards. This also implies that one will not be able to choose the old regime after the due date of filing the return. This is because the due date for filing form 10IE is the due date for filing return. Hence, the returns filed after the due date will be processed under the new regime by default.
Read these FAQ’s for more understanding of this line.
a. How to opt for the old regime after the budget 2023?
Before the Budget 2023 announcement, a taxpayer with income from business & profession had to file Form 10IE on or before the due date of ITR filing. As per the amendments proposed by the Union Budget 2023 in the new tax regime, from FY 2023-24 onwards taxpayers will be required to opt for the old tax regime, and the new tax regime will be the default option. The way for opting for the old tax regime will be prescribed by the Income Tax Department in due course.
b. How will my ITR be processed if forget to opt for the regime?
Since the new regime is the default one, ITR shall be processed under the new regime.
c. If I choose new regime this year, can I switch to the old regime next year?
Yes, a taxpayer can switch to the old regime any year, provided they do not have any business & profession income.
d. What is the tax relief available under both regimes?
Under section 87A rebate is available for both regimes. Under the old regime, a maximum of ₹12,500 rebate is given if the taxable income does not exceed ₹5 Lakhs. However, beginning April 1, 2023, the new tax regime would provide a maximum of ₹25,000 rebate if taxable income does not exceed Rs 7 lakh.
e. Which regime is better?
This depends on the income & investments made based on the personal financial goals of a taxpayer. The taxpayer can compare the tax liability under both regimes and make a choice then as suitable to him.
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