Effects Of New Tax Regime On Your Financial Planning?

Written by Gagandeep Arora - Printed on - Date - 11th Sep 2023

Have you ever wondered whether you’re better off under the new tax regime or the old one for this year? If not, you're in good company because many people tend to put off this decision until March comes knocking.

But you need to make this choice sooner, and these five changes introduced in the Union Budget 2023 should be at the top of mind:

1. Default Tax Regime-: From FY 2023-24, the new tax regime will be the default tax regime. However, you will still have the option to switch to the old tax regime. And remember, salaried individuals get the luxury of making this choice every year, but if you're self-employed, you get to choose only once in your lifetime.

2. Tax Slabs Widened Under New Regime- The basic exemption limit has been increased from Rs. 2.5 lakhs to 3 lakhs. Here’s how the tax slabs look under both regimes.

3. Standard Deduction- The standard deduction of Rs 50,000 has also been extended to the new regime.

4. Tax Rebate Limit- Under the new tax regime, the tax rebate limit has been increased to Rs. 7 lakhs, whereas it stays Rs. 5 lakhs under the old tax regime. With marginal relief, effectively, the tax-free limit comes to Rs. 7.27 lakhs under the new tax regime.

5. Presumptive Taxation Scheme-: Freelancers earning up to Rs 3 crore and professionals earning up to Rs 75 lakhs can now benefit from the presumptive taxation scheme, provided that 95% of their earnings come through digital means.

So, yeah, you need to figure out which tax regime aligns with your financial circumstances. Feeling uncertain about which one to choose? Take a look at this detailed comparison. You can also use our income tax calculator.

Your financial future is in your hands, and making an informed choice is the first step toward securing it.