New vs Old tax regime? How to optimise your tax planning for FY24
The Indian government introduced the new tax regime in 2020, offering taxpayers a choice between the old and new tax structure. This move sparked a debate amongst taxpayers about which regime is more beneficial for them. With the new financial year 2023-24 around the corner, it is essential to understand the key differences between the new and old regime and make an informed decision.
Let's consider the case of Mr. Sharma, a salaried individual. Under the old regime, Mr. Sharma would opt for various deductions and exemptions available, such as those for house rent, children's education, and medical expenses, to reduce his taxable income. He found this beneficial as it lowered his tax liability significantly. However, with the introduction of the new tax regime, Mr. Sharma realised that he would lose out on these deductions and exemptions but would be subjected to lower tax rates.
The major distinction between thetwo tax regimes lies in the deductions and exemptions offered. Under the old regime, taxpayers can claim deductions under various sections of the Income Tax Act, such as 80C, 80D, and 24(b). These deductions significantly reduce the taxable income and subsequently the tax liability. In contrast, the new regime eliminates most of these deductions and offers lower tax rates.
To plan for the upcoming financial year, taxpayers need to carefully consider their financial situation and weigh the pros and cons of each tax regime.
A new tax regime was announced both for corporates and individuals wherein the government announced reduced tax rates subject to for-go of certain deduction which ultimately led to simplified compliance and reduction of tax liability for certain class of assessee.
For individuals with
