{"id":224706,"date":"2023-02-02T19:02:54","date_gmt":"2023-02-02T13:32:54","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=224706"},"modified":"2023-02-25T10:32:01","modified_gmt":"2023-02-25T05:02:01","slug":"new-tax-regime-gives-spending-flexibility","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/new-tax-regime-gives-spending-flexibility\/","title":{"rendered":"New tax regime gives spending flexibility"},"content":{"rendered":"\n

Source<\/strong>: The post is based on the following articles<\/p>\n

\u201cZero tax for annual income up to \u20b97 lakh under new scheme” <\/strong>published in The Hindu <\/b>on\u00a02nd February 2023<\/b>.<\/p>\n

\u201c\u2018New tax regime gives spending flexibility\u2019\u201d and \u201cNew tax regime is very attractive now\u201d <\/strong>published in the\u00a0Livemint\u00a0<\/b>on 2nd <\/b>February 2023<\/b>.<\/p>\n

\u201cTax rebate under the new regime, explained with two examples\u201d <\/strong>published in the\u00a0Indian Express\u00a0<\/b>on\u00a02nd February 2023<\/b>.<\/p>\n

What is the News?<\/strong><\/h3>\n

In the Budget 2023-24, the government exempted those earning up to \u20b97 lahks a year from paying any income tax under the new tax regime.<\/p>\n

About the new tax regime on Personal Income Tax<\/h5>\n
\"Budget
Source: PIB<\/figcaption><\/figure>\n

There are a few major announcements relating to the personal income tax. Such as a)<\/strong> The new regime for individuals and Hindu undivided families, or HUFs, brought via Section 115BAC of the Income Tax Act was aimed at bringing in a lower rate and a simpler tax system from 1 April 2020, b)<\/strong> The rebate limit<\/strong> in the new regime has been increased to \u20b9 7 lakh, meaning that persons in the new regime with income upto \u20b9 7 lakh will not have to pay any tax.<\/p>\n

c)<\/strong> The tax structure in the new personal tax regime has been changed by reducing the number of slabs to five and increasing the tax exemption limit to \u20b9 3 lakh, d)<\/strong> The government introduced a standard deduction of \u20b950,000. Currently, salaried individuals get standard deductions under the old tax regime but not the new regime.<\/p>\n

e)<\/strong> The highest surcharge rate in personal income tax has been reduced from 37% to 25% in the new tax regime for income above \u20b92 crores. This would result in the maximum tax rate of personal income tax coming down to 39% which was earlier 42.74%.<\/p>\n

Applicability<\/strong>: The benefit of standard deduction has been extended to the salaried class and the pensioners including family pensioners under the new tax regime.<\/p>\n

The new income tax regime has been made the default tax regime<\/strong>. However, the citizens will continue to have the option to avail the benefit<\/strong> of the old tax regime.<\/p>\n

For example, If a person is earning 7.5 lahks annual salary then, s\/he will have to pay nil tax on Rs 0-3 lakh, 5% on Rs 3-6 lakh, and 10% on Rs 6-9 lakh.<\/p>\n

What is the rationale behind the introduction of the new tax regime?<\/h2>\n

Complications with the old regime<\/strong>: The old regime complicates taxes. For instance, the Old regime allows for tax exemptions and deductions on investments, insurance and expenses such as HRA (house rent allowance). Hence, many committees reported that it needs to be simplified.<\/p>\n

Tax evasion and avoidance<\/strong>: In the old regime the taxes are higher, hence people find other ways to avoid taxation.<\/p>\n

Highest Surcharge<\/strong>: The highest tax rate in India is 42.74%, it is among the highest in the world. Hence, the government aims to reduce this rate.<\/p>\n

What are the advantages of the new tax regime?<\/h2>\n

-Increase<\/strong> tax compliance<\/strong>: In the new regime, the rate of taxes is simple and low. The simplification of taxes will increase the compliance and help in formalizing the economy.<\/p>\n

-The benefit (in the form of lower tax outgo) of moving to the new tax regime gets better for those with very high income levels (over \u20b95 crore).<\/p>\n

What are the concerns associated with the new tax regime?<\/h2>\n

The old income tax system had so many exemptions to incentivise savings of different kinds such as exemptions for long-term savings for retirement, investment in PPF, NPS or other 80C exemptions.<\/p>\n

But the new tax regime pushes towards consumption. This might hurt India\u2019s savings rate in future<\/strong>. However, the government is of the opinion that the new tax regime will provide spending flexibility<\/strong> in the hands of the public as taxpayer knows how to spend their money.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the following articles \u201cZero tax for annual income up to \u20b97 lakh under new scheme” published in The Hindu on\u00a02nd February 2023. \u201c\u2018New tax regime gives spending flexibility\u2019\u201d and \u201cNew tax regime is very attractive now\u201d published in the\u00a0Livemint\u00a0on 2nd February 2023. \u201cTax rebate under the new regime, explained… Continue reading New tax regime gives spending flexibility<\/span><\/a><\/p>\n","protected":false},"author":10311,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,9],"tags":[10500,10501,10498],"class_list":["post-224706","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-public","tag-indian-express","tag-live-mint","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/224706","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10311"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=224706"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/224706\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=224706"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=224706"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=224706"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}