Does this mean that today’s Budget rang a death knell for the old tax regime? Let us understand whether the old tax regime will remain relevant, and if yes then for how long. The tax slab rates under the old tax regime are as follows:
Now imagine someone who earns ₹12 lakh is entitled to claim a rebate of upto ₹60,000 in the new tax regime thereby saving himself from paying any tax at while, whereas in the old regime, he will fall in the highest tax bracket of 30 percent.
Under the old tax regime, maximum rebate that one can claim is ₹12,500 – which can be claimed by the taxpayers earning upto ₹5 lakh.
The gap has widened between the two regimes in standard deduction as well. While old tax regime offers maximum standard deduction of ₹50,000, the new tax regime will now offer ₹75,000.
From optional to default
The government’s inclination, if not intent, towards the new tax regime became profoundly evident when this was announced as the default regime in FY 2023-24. To make it worse, taxpayers who have a business or professional income are not even allowed to switch to old tax regime every year.
Once they switch back to the new regime two times, they won’t be able to switch to the old tax regime again in future. However, individuals who have non-business income can switch between old and new regimes every year.
New income tax
Within a week’s time, government will introduce new income tax law which – while being simpler and easier to understand – will carry half of the present law, FM Nirmala Sitharaman pointed out today.
And today’s changes – including a push for the new tax regime – are expected to align with the new tax law. In fact, some are also of the view that today’s Budget has done somewhat more than just setting the tone for the new income tax law. Was there an implicit message that the old tax regime will soon be history?
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