Income Tax Clarity: A Deep Dive into the Unchanged Income Tax Regime for 2023-24

Finance Ministry Dispels Rumors: No Alterations to New Income Tax Regime from April 1

The Finance Ministry has officially announced that the new income tax regime for individuals will see no changes for the current fiscal year. In a clarification aimed at addressing speculations stirred by social media posts, the ministry affirmed that the regime introduced on April 1, 2023, remains unaltered.

Under the spotlight were claims suggesting impending changes to the tax structure starting April 1, 2024. Dispelling these rumors, the Ministry statement clarified, There is no new change which is coming in from 01.04.2024.

Introduced at the onset of the financial year 2023-24, the revamped income tax regime promised individuals lower tax rates. Despite this, it came with a caveat—exemptions and deductions that were available under the old regime (with the exception of the standard deduction of ₹50,000 from salary and ₹15,000 from family pension) would no longer be accessible.

“Tax regimes are defaulted to the new regime. However, taxpayers have the autonomy to select between the old and new regimes, based on what they perceive as most beneficial... The option to opt- out of the new tax regime is available until the filing of the return for the Assessment Year (AY) 2024-25, the Ministry elaborated.

Under this regime, income up to ₹3 lakh is not taxable. Subsequent slabs have been structured to impose a 5% tax on incomes ranging from ₹3-6 lakh, a 10% tax on ₹6-9 lakh, followed by 15% and 20% taxes on incomes spanning ₹9-12 lakh and ₹12-15 lakh, respectively. For incomes exceeding ₹15 lakh, a tax rate of 30% is applicable.

Declared as default regime" for the fiscal year 2023-24, with the corresponding Assessment Year being AY 2024-25, the new tax structure offers flexibility. Taxpayers, particularly those without business income, are granted the liberty to switch between the new and old regimes annually, based on their financial discretion.

Meanwhile, the old tax regime continues to be in effect, presenting a series of deductions and exemptions. It offers tax exemption on incomes up to ₹2.5 lakh, imposes a 5% tax on earnings between ₹2.5-5 lakh, a 20% tax on the bracket of ₹5 lakh to ₹10 lakh, and a 30% levy on incomes above ₹10 lakh.
This announcement comes as a reassurance to taxpayers navigating their way through the fiscal year, ensuring a clear understanding of their tax obligations under the prevailing legal framework.