New Income Tax Regime 2023-24: 5 key changes you must know

Finance Minister Nirmala Sitharaman announced a slew of measures for taxpayers in Budget 2023. With a hike in the basic exemption limit and rebate and tweaks to the income tax slabs, Sitharaman has made the new income tax regime attractive for salaried individuals. Budget 2023 has also introduced standard deductions in the new tax regime.

“Personal income tax has seen substantial changes after a very long time, which will benefit the middle class. This country has been waiting for direct taxation to be simplified and compliance to be made easier,” Sitharaman told after presenting Budget 2023.

The limit of total income for rebate under section 87A of the Income-tax Act, 1961 has been increased from Rs 5 lakh to Rs 7 lakh for those opting for the new tax regime. Simply put, if your taxable income is below Rs 7 lakh, you do not have to pay any income tax in the new tax regime.

The basic exemption limit under the new tax regime has been revised from Rs 2.5 lakh to Rs 3 lakh. Individuals with an income of up to Rs 3 lakh do not have to pay any income tax under the new income tax regime.

Budget 2023 tweaked the income tax slabs under the new tax regime. The maximum exemption limit will be Rs 3 lakh and for every additional Rs 3 lakh income, the next slab rate will apply.

Up to Rs 3 lakh - 0 per cent tax
Between Rs 3 and 6 lakh - 5 per cent tax
Between Rs 6 and 9 lakh - 10 per cent tax
Between Rs 9 lakh and Rs 12 lakh - 15 per cent tax
Between Rs 12 lakh and Rs 15 lakh - 20 per cent tax
Above Rs 15 lakh above - 30 per cent tax

Standard deduction has been extended to the optional tax regime. Salaried individuals opting for the simplified tax regime can avail of a standard deduction of Rs 50,000. Pensioners can also opt for a standard deduction of Rs 15,000 under the new tax regime.

In the new tax regime, the highest rate of surcharge of 37 per cent on income above Rs 5 crore is reduced to 25 per cent.