new tax regime frequently asked questions

New Tax Regime 2024: Check out here all the frequently asked questions about the new income tax regime for FY 2024-25 slabs, calculator, and deductions for salaried employees. Latest Budget brought in many surprising changes to the new tax regime. In this article, we've addressed some key questions about these changes. 

What is the Tax Slab Rate for FY 2024-25 as per Budget 2024?

What Are New Income Tax Slabs & Tax Rates Under Revised New Tax Regime?

The tax slabs have been revised under the new tax regime. The new Income tax slabs under the new tax regime for FY 2023-24 (AY 2024-25) are:

Surcharge and Cess are to be added separately based on the taxable income over and above the tax rates mentioned above.

What Is Surcharge Amount Under Revised New Tax Regime? Is That Change Applicable Only For Those With An Income More Than 5 Crores?

Under the revised new tax regime, the surcharge rate has been reduced from 37% to 25%  for taxpayers earning income more than Rs 5 crores. Therefore, this surcharge change applies only to those who opt for the new tax regime and have an income of more than Rs 5 crores.

The surcharge rates for various income levels are as under:

The New Income Tax Slabs Are Rs 3 lakh - 7 lakh With 5% Tax Rate, Rs 7 lakh- 10 lakh With 10%, etc. But Why Is There No Income Tax Upto Rs. 7 lakh?

A tax rebate reduces your tax amount. However, a tax rebate is allowed only to the resident individuals. However, the tax slabs are applicable to all whether individuals, HUFs, AOPs, etc. or whether resident or non-resident. 

So while computing taxes, they will first be calculated as per the slab rates. Then the rebate shall be reduced from your final tax amount, bringing it down to zero. You will, however, get a rebate only if you are a resident individual. 

Similar to the old tax regime, where there are no taxes till Rs. 500,000 of total income, in the new tax regime as well there are no taxes till Rs.700,000 due to rebate under section 87A.

Additionally, under the new tax regime, wherever the income is in excess of Rs. 700,000, the taxes on such income shall be restricted to the income in excess of Rs 700,000. This concept is called marginal relief. 

What Deductions Are Available Under The Revised New Tax Regime?

Deductions in the new regime: 

• A Standard deduction for salaried individuals up to Rs 75,000 (For FY 24-25 onwards)
• Standard deduction on such pension: ₹25,000 or 1/3rd of pension, whichever is lower. (For FY 24-25 onwards)
• Interest on Home Loan u/s 24b on Let-out property
• Employer's contribution to NPS to the extent of 14% of Salary (For FY 24-25 onwards)
• All contributions to Agniveer Corpus Fund (section 80CCH)
• Leave Encashment u/Section 10(10AA)
• Gratuity u/ Section 10(10)
• Transport allowances to Persons with Disabilities 
• Exemptions for Voluntary Retirement Scheme u/ Section 10(10C)
• Gifts up to Rs 50,000

Will I Receive An Exemption On Leave Encashment Under New Tax Regime?

Yes, exemption on leave encashment is available under the new tax regime. 

In Budget 2023, the exemption threshold for leave encashment was increased 8-fold from ₹3 lakhs to ₹25 lakhs for non-government employees. 

Thus, at the time of retirement, leave encashment of up to ₹25 lakhs is tax-free under Section 10(10AA).

Which Tax Regime Is Better: Old or New?

There is no straightforward answer; it depends on the income, exemptions, and deductions that you are eligible for, and on the investments that you have made. 

Using our income tax calculator, you can calculate how much tax you can save under both regimes and decide the most beneficial regime for you. For a detailed understanding of which tax regime you must opt for according to your pay scale, click here. 

Are Investments In PF and VPF Taxable Under The New Regime?

No, investments like PF and VPF are tax deductible under 80C. However, section 80C deduction is not available under the new regime. Click here to know what exemptions and deductions are allowed under the new regime.

Withdrawals From Agniveer Corpus Fund Is Not Taxable As Per Section 10(12C). Will This Exemption Be Available Under The New Regime too?

Yes. Any amount received from the Agniveer Corpus Fund will be tax-free under both the old and the new tax regimes.

An individual enrolled under the Agnipath scheme can make a contribution to the Agniveer Corpus Fund. An equal contribution shall be made by the government. Both these contributions will be allowed as tax deductions from your income under the newly inserted section 80CCH.

Not only this, but even the amount received at the end of your tenure will also be exempt from tax under the newly inserted section 10(12C). 

Given The Standard Deduction Of Rs. 75,000 Is There, Will Tax On An Income Of 7,75,000 Be Zero As Per New Tax Regime?

In Budget 2023, a tax rebate on an income up to ₹7 lakhs was introduced under the new tax regime. This means that taxpayers with an income of up to ₹7 lakhs will not have to pay any tax at all if they opt for the new tax regime. Also, a Rs 75,000 standard deduction was introduced under the new tax regime. Therefore, a taxpayer with income up to Rs 7.75 lakhs will pay zero tax if he opts for the new tax regime. 

Last Year I Filed As Per New Regime. Can I Switch Back To Old Regime, And How Frequently Can I Keep Switching?

Starting from FY 2023-24, the new income tax regime will be considered the default tax regime. If you wish to switch to the old regime, you must submit a form, i.e., Form 10- IEA at the time of filing the return.  

How frequently you can switch between old and new regimes depends on your income type. If you have:

• Business or professional income: you can switch between the old and new regime only once in a lifetime
• Other than business/professional income like salary etc: You can switch between the old and new tax regimes every year.

How Will Presumptive Taxation Work In Case Of New Regime?

The presumptive scheme works the same under the new and the old tax regime

*95% of your earnings should be received through online payment modes, not cash.

What Are The Advantages Of The New Tax Regime?

Under the new tax regime, you don’t need to keep track of rent receipts, travel tickets, and complicated tax planning. The new tax regime offers lower tax rates and fewer deductions. This eliminates the need to invest in tax-saving schemes and insurance plans which may not align with your financial goals.

Will Insurance Proceeds Be Taxable - Will The Originally Paid Premium Amount Be Exempt From That?

Amount received from a life insurance policy is exempt from taxes as long as the premiums paid on the policy does not exceed 10% of the sum assured. However, there have been instances of taxpayers exploiting this exemption by investing in policies with high premium contributions and claiming higher tax exemptions. To prevent such misuse, the government restricted the tax exemption on high value life insurance policies. Therefore, the amount received from life insurance policies will now be taxable if the annual premium paid in a year exceeds Rs. 5 lakhs.

Can I Claim Section 80C Deduction Under Revised New Tax Regime?

No, if you opt for the new tax regime you will not be allowed any tax benefit under section 80C.

Also, one can claim the deduction against the income from family pension of Rs.25,000 under the new tax regime.