New tax regime better if deduction, exemption less than ₹3.75 lakh: Official explains
Old vs new income tax regime: Those who claim less than ₹3.75 lakh exemption will save money in the new tax regime, a ministry official explained.
As taxpayers are now divided between the old and new tax regime after finance minister Nirmala Sitharaman made a slew of announcements on personal tax making in an attempt to make the new regime more attractive, a finance ministry officer said the new regime would be advisable for those whose deductions and exemption claims are less than ₹3.75 lakh annually. They will be paying less tax than the old regime, the officer said, as quoted by news agency PTI. Read | Budget 2023 new income tax slabs: How to calculate your tax
"So, a taxpayer who claims deductions less than ₹3.75 lakh while filing the annual I-T returns will be advised to opt for the new tax regime as declared in the Budget. They will stand to benefit by enjoying the reduced tax slab as stated in the Budget," the officer said. The figures have been derived after analysing tax filing data, he said.
The new tax regime does not have many concessions which the old regime has though standard deduction has been introduced to the new regime for the first time. The new tax regime makes income upto ₹7 lakh annually tax free. But for those who are much higher than 7 lakh, the question is whether to shift to the new regime as they may end up paying more taxes with limited exemptions available.
Not many taxpayers can claim deductions on various investments, expenses and loans to the tune of ₹3.75 lakh per annum, the finance ministry official said.
The new tax regime becomes the default one while the old one will also continue, it has been clarified. Nirmala Sitharaman reiterated that the aim is to attract taxpayers to the new regime but no one will be forced to switch to the new regime.
(With PTI inputs)