Benefits of new income tax regime explained; 4 reasons you should opt for it

It is now up to salaried people to decide between the Old Tax Regime (with exemptions and deductions) and the New Tax Regime, which was made more enticing in the February budget, as the budget announcements made by Union Finance Minister Nirmala Sitharaman take effect in the new fiscal year beginning April 1.

The new tax regime also offers a number of other benefits, including the standard deduction, no taxation on taxable income up to Rs. 7 lakh, a reduction in the surcharge on taxable incomes beyond Rs. 5 crore, and more.

What modifications have been made under the new tax regime?
The new tax system is something that the government wants more and more people to choose. To make it more appealing, they have therefore included a few bonuses under this. The following are the modifications made public under the new tax system:

1. New income tax slabs
Six tax brackets are available under the new tax system, with no tax applied to income up to Rs. 3 lakh and a tax rate increasing by 5 percentage points for each additional Rs. 3 lakh in income.

2. Increase in basic exemption amount under new tax regime
The basic exemption level has increased as a result of adjustments made to the income tax slabs under the new tax system. The basic exemption amount under the new tax system has increased by 50,000 rupees from Rs 2.5 lakh to Rs 3 lakh.

3. Standard deduction under new tax regime
With the new tax regime, the standard deduction benefit is now available to salaried individuals and retirees (including family pensioners). A person who chooses the new tax regime for the fiscal years 2023–24 is entitled to a standard deduction of Rs 50,000. Pensioners with dependents who choose the new tax regime are qualified to claim a standard deduction of Rs. 15,000. 

4. Up to Rs. 7 lakh in income is tax-free
If the taxable income for a person choosing the new tax regime for FY 2023–24 does not reach Rs 7 lakh in a financial year, they will not be subject to taxation. Also, a person with taxable income up to Rs 7.5 lakh can benefit from the Rs 50,000 standard deduction. The taxable income will be reduced to Rs 7 lakh as a result, leaving them with no tax responsibility.

Note: New tax regime is selected by default unless...
The government has made the new tax regime the default option. This implies that your company will deduct taxes from your wage based on the income tax bracket that applies to your income under the new tax regime unless you specifically choose the old tax regime.