The government recently confirmed that there are no new changes in the Income Tax rules starting April 1. This clarification comes amidst misinformation circulating on social media platforms. The Ministry of
Finance emphasized that the new tax regime, which applies to individuals rather than companies or firms, will come into effect from the financial year 2023-24. This means that for the assessment year 2024-25, the new tax rules will be in place.
Government Clarifies No New Tax Regime Change
To help taxpayers understand better, the finance ministry announced on Sunday that starting April 1, 2024 (for the financial year 2024-25), there won’t be any new changes in the current tax rules. This means that Finance Minister Nirmala Sitharaman didn’t propose any adjustments to the tax system, whether it’s direct or indirect, in the interim budget for 2024-25.
As a result, the income tax brackets for both the existing and new systems stay the same as those set in the Union Budget for 2023-24.
Also Read: 8 Important Financial Changes in April 2024
India’s New Tax Regime and Flexibility for Taxpayers
In the updated tax system, the tax rates are notably reduced. However, many exemptions and deductions, aside from the standard ones like Rs 50,000 from salary and Rs 15,000 from family pension, are no longer applicable as they were in the old tax system.
The finance ministry’s statement clarifies that while the new tax system is the default option, taxpayers have the flexibility to select the tax system they believe benefits them the most.
It’s important to highlight that individuals can opt out of the new tax system until they file their return for the Assessment Year 2024-25.
Moreover, individuals eligible for the new tax system, without any business income, can decide which regime to choose each financial year. This means they can opt for the new tax system in one year and switch to the old one in another year, and vice versa, depending on what suits them best.
What You Need to Know for Tax Regime Financial Year 2023-24?
- Starting April 1st, 2024, there are no new changes in tax regulations.
- The recent tax rules introduced in the Finance Act 2023, known as section 115BAC(1A), differ from the previous regime by eliminating exemptions.
- These new tax rules apply to individuals and not companies or firms by default, effective from the 2023-24 fiscal year, with the corresponding assessment year being 2024-25.
- The new tax rates are lower under this regime, but it doesn’t allow for various exemptions and deductions, except for a standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension.
- While the new tax regime is the default option, taxpayers have the freedom to choose between the old and new regimes based on what suits them best.
- Taxpayers can opt out of the new tax regime until filing their return for the assessment year 2024-25.
- Individuals without business income can select their preferred tax regime each fiscal year, allowing them to switch between the new and old regimes as they see fit.
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Government Clarifies No New Tax Regime Change FAQs
Q.1. When do the new Income Tax rules come into effect?
Ans. The new tax regime starts from the financial year 2023-24.
Q.2. Can taxpayers still benefit from exemptions?
Ans. Most exemptions and deductions are no longer applicable under the new regime.
Q.3. Is opting out of the new tax regime possible?
Ans. Yes, taxpayers can opt out until filing their return for AY 2024-25.
Q.4. How can individuals without business income choose their tax regime?
Ans. They have the option to switch between the new and old regimes each fiscal year.
Q.5. Are there any significant changes to the tax brackets?
Ans. No, the tax brackets remain the same as set in the Union Budget for 2023-24.
