Brief on New Tax Regime u/s 115BAC
In the Budget 2020, the Government of India has introduced a new personal income tax regime.
This is optional and one can choose to follow either the existing old income tax regime or the
new one.
Subsequently in the Budget 2023, the Government of India has made few significant
changes in new tax regime as detailed below:
❖ New Tax Regime is set to be made ‘Default’ Regime. Employee will have choose an option to
avail benefit of the Old Tax Regime. No changes have been proposed under Old Tax Regime.
❖ Rebate has been increased from 5 Lakhs to 7 Lakhs under New Tax Regime. Which means,
effectively there is no Income tax up to income of 7 Lakhs. Rebate up to 5 lakhs income would
continue under Old Tax Regime.
❖ Standard deduction of INR 50,000 is extended to New Tax regime, which was earlier available
only for Old Tax regime.
❖ Highest surcharge rate of 37 percent is reduced to 25 percent in New Tax Regime. This will
result in highest income tax rate of 39 percent under New Tax Regime, whereas old tax regime
highest tax slabs remain at 42.74%.
❖ Also there is change in the tax slab for New Tax regime which is provided below.
New Tax Regime
Old Tax Regime
Up to 300000
300001 –600000
600001 –900000
900001 –1200000
Income Tax
Income Rates
Tax
(Including
Rates
Surcharge
& Cess)
Nil
Nil
5.00%
5.20%
10.00%
10.40%
15.00%
15.60%
1200001 –1500000
20.00%
20.80%
1500000 –5000000
5000001 –
10000000
10000001 –
20000000
20000001 and
above
30.00%
31.20%
30.00%
34.32%
30.00%
35.88%
30.00%
39.00%
Income Slabs
(INR)
Income Tax
Income Rates
Income Slabs
Tax
(Including
(INR)
Rates
Surcharge
& Cess)
Up to 250000
Nil
Nil
250001 –500000
5.00%
5.20%
500001 –1000000
20.00%
20.80%
1000001 –5000000 30.00%
31.20%
5000001 –
10000000
30.00%
34.32%
10000001 –
20000000
30.00%
35.88%
20000001 –
50000000
30.00%
39.00%
50000001 and
above
30.00%
42.74%
List of exemptions/deductions and their applicability in both tax regimes:
Deduction Type
Standard Deduction of Rs. 50000 u/s 16(ia)
Professional Tax deducted from Salary u/s 16(iii)
Exemptions under Section 10
House Rent Allowance u/s 10(13A)
Children Education, Hostel Allowance etc u/s 10(14)(ii)
Leave Travel Allowance u/s 10(5)
Uniform Allowance, helper allowance etc u/s 10(14)(i)
Gratuity
Leave Encashment
Income of Minor Child up to Rs.1500 u/s 10(32)
Housing/Other Income
Interest on Housing Loan - Self Occupied u/s 24(b)
Loss from House Property Income - Let Out
Interest on Housing Loan - Additional Exemption (80EE &
80EEA)
Deductions Under 80C
Employees Provident Fund
Voluntary Provident Fund
Public Provident Fund
Children's Education - Tuition Fees
Housing Loan Principal Repayment
Employees contribution towards NPS (80C & 80CCD(1))
LIC/Mutual Funds / ULIP/NSC/SSY/SCSS/FD/RD/NSC etc
Chapter VI-A
Medical Insurance Premium (Sec 80D)
Deduction towards Handicapped Dependents (Sec 80DD)
Deduction towards treatment of Specified Diseases (Sec
80DDB)
Interest Paid on Higher Education Loan (Sec 80E)
Deduction for Permanent Disability (Sec 80U)
Interest on deposits in Saving bank accounts (80TTA)
Deduction in respect of Interest income (80TTB) for Senior
Citizen
Exemption on Loan for Purchase of Electric Vehicles (80EEB)
Employer's contribution toward NPS (up to 10%)(u/s 80CCD)
Employee's Additional contribution toward NPS (up to
50K)(u/s 80CCD)
Existing
Tax
Regime
Yes
Yes
New
Tax
Regime
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
No
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
No
No
Yes
Yes
No
Other Flexi Benefit pay components
Free Meal/ Food Coupon
Health Club/ Fitness Reimbursement
Professional Development/ Research Allowance
Books & Periodicals
Gift Vouchers (up to 5000)
Internet & Telephone Reimbursement
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Cut-off limit of deductions foregone for choosing new tax regime:
The slab cut-off limit (tentative) of deductions foregone for opting new tax regime is provided
below.
Tax Rate Slab
Cut-off limit
5%
Rs. 50,000/-
20%
Rs. 2,62,500/-
30%
Rs. 3,75,000/-
The above-mentioned cut-off are only in general & tentative basis. The exact amount of actual
benefit may be computed on case to case basis.
Income Tax department released a calculator for this purpose which can be accessed at
https://incometaxindia.gov.in/Pages/tools/115bac-tax-calculator-finance-bill-2023.aspx