The Indian government introduced the new tax regime slabs to provide taxpayers with a simplified and more transparent taxation system. This reform aims to make income tax calculation easier and reduce the compliance burden. However, the impact of the new tax regime slabs varies across different income groups, making it essential for taxpayers to carefully evaluate which regime suits their financial situation.

Alongside the changes in tax slabs, the government has recently announced an income tax return extended due date for the relevant assessment year. This extension provides taxpayers and professionals additional time to file their returns under the new regime without penalties or interest. In this article, we will explore how the new tax regime slabs affect various income brackets and guide taxpayers on optimising their tax liabilities under the new system.

Understanding the new tax regime slabs

In the Budget 2020, the government introduced an optional new tax regime with revised income tax slabs and lower tax rates but with limited exemptions and deductions. This regime offers individuals and Hindu Undivided Families (HUFs) an alternative to the existing (old) tax regime.

The key features of the new tax regime slabs are:

– Lower tax rates compared to the old regime.

– Removal or restriction of most exemptions and deductions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and standard deduction.

– Simplified tax filing process due to fewer compliance requirements.

– Taxpayers can opt annually between old and new regimes based on their income and investments.

New tax regime slabs for FY 2023-24 (AY 2024-25)

The new tax regime introduced by the Government of India offers simplified tax slabs with lower rates but removes most deductions and exemptions. It is applicable to individual taxpayers below 60 years, including salaried individuals, professionals, and Hindu Undivided Families (HUFs).

Annual Income (Rs. )	Tax Rate
Up to Rs. 3,00,000	Nil
Rs. 3,00,001 – Rs. 6,00,000	5%
Rs. 6,00,001 – Rs. 9,00,000	10%
Rs. 9,00,001 – Rs. 12,00,000	15%
Rs. 12,00,001 – Rs. 15,00,000	20%
Above Rs. 15,00,000	30%

Taxpayers with income up to Rs. 7,00,000 under this regime are eligible for Section 87A rebate, resulting in zero tax liability.

These slabs apply equally to senior citizens (60–80 years) under the new regime, unlike the old regime which offered a higher basic exemption limit for seniors.

Impact on different income groups

The effect of the new tax regime slabs depends largely on the taxpayer’s income level and the usage of deductions available under the old tax regime.

Low-income earners (up to Rs. 5 lakhs)

For those in this category, the new tax regime offers a straightforward advantage. The exemption up to Rs. 3 lakhs and a 5% tax rate up to Rs. 6 lakhs enables these earners to pay lower tax than before, especially if they do not claim numerous exemptions or deductions. Since low-income groups usually have limited investments for tax-saving, the new slabs and minimal compliance requirements can reduce complexity.

Middle-income earners (Rs. 5 lakhs to Rs. 12 lakhs)

Middle-income taxpayers make up a significant portion of salaried professionals and self-employed individuals. Many in this bracket rely on deductions such as Section 80C (investments up to Rs. 1.5 lakh), Housing Loan principal repayment, or medical insurance under Section 80D to reduce taxable income.

Here, the new tax regime slabs could either result in higher or lower tax liabilities, depending on how effectively one claims eligible deductions under the old regime. Taxpayers with considerable eligible investments or expenses benefit from continuing with the old system, whereas those with fewer deductions may find the new regime preferable.

Tax planning becomes essential in this group to compare effective taxes under both regimes.

High-income earners (above Rs. 12 lakhs)

High-income taxpayers often utilise a wide range of exemptions and deductions to lower their tax burden significantly. The old tax regime permits claiming benefits such as HRA, standard deduction of Rs. 50,000, and multiple allowances linked with employment.

Under the new tax regime, most of these deductions are removed or restricted, which may lead to a higher tax outgo for these earners despite the lower tax rates across slabs. However, if the taxpayer is not interested in making tax-saving investments and prefers simplicity, the new slabs may still be attractive.

Overall, for high-income groups, the old tax regime remains advantageous, but a thorough analysis of both regimes is necessary annually.

Income tax return extended due date eases compliance under new tax slabs

In practice, tax filing can be stressful due to fixed deadlines. Recognising this, the government has announced an income tax return extended due date for the financial year 2023-24, allowing taxpayers who opt for the new tax regime slabs more time.

This extension helps avoid late-filing penalties and offers flexibility to individuals and professionals in compiling documents and deciding the most beneficial tax regime. It is especially beneficial for mid-to-high income groups who may wish to actively compare tax liabilities under both regimes before filing.

Taxpayers should monitor official notifications from the Income Tax Department and plan filing accordingly to benefit from the extended deadline.

Key considerations when choosing between old and new tax regimes

While the new tax regime slabs offer simplified calculation and competitive tax rates, choosing the correct system should be based on a detailed evaluation.

– Assess your total income and eligibility for deductions under the old regime.

– Calculate tax liabilities under both regimes to identify potential savings.

– Consider your investment strategy and whether you intend to claim tax-saving investments such as ELSS, PPF, or LIC premiums.

– Keep future financial goals in mind as some deductions double as investments and savings.

– Factor in the extended due date for income tax return filing to enable sufficient preparation.

Benefits of the new tax regime slabs beyond tax rates

Apart from the nominal lower rates, the new tax regime slabs offer non-monetary benefits for many taxpayers:

– Fewer compliance challenges related to documentation of exemptions and deductions.

– Quicker tax filing process with simplified form options.

– Reduced need for frequent tax planning consultations, saving costs.

– Enhanced clarity and predictability in tax computation.

This makes the system attractive for new taxpayers and those preferring simplicity over maximising deductions.

Conclusion

The new tax regime slabs have revolutionised the way Indian taxpayers assess their income tax liability. While they benefit low and some middle-income groups by simplifying tax rates and calculations, high-income earners may find more advantages remaining with the old tax regime slabs owing to retained exemptions and deductions.

The recent announcement of the income tax return extended due date further empowers taxpayers to make informed decisions and file accurately without penalty concerns. It is advisable for all taxpayers to carefully evaluate both regimes each financial year and utilise available extensions smartly.

Staying updated with changes to tax laws and filing deadlines is crucial. Whether you choose the new tax regime slabs or the old system, thoughtful tax planning remains pivotal. Exploring expert advice on mutual funds and investments aligned with your regime choice can further optimise returns and tax efficiency.