Finance Ministry Clarifies Tax Confusion for 2024

Finance Ministry Clarifies New Tax Regime Confusion in 6-Point Note

In the wake of the latest Union Budget, significant changes in income tax proposals have come into effect as of today. However, there has been some confusion surrounding the implementation of the new tax regime, particularly regarding its implications for taxpayers. To address this confusion, the finance ministry released a comprehensive clarification on various aspects of the new tax regime in a recent post on social media platform X.

The key points clarified by the finance ministry are as follows:

1. No New Changes Effective from 01.04.2024:
   Contrary to misleading information circulating on social media, there are no new changes coming into effect from April 1, 2024. The new tax regime under section 115BAC(1A) was introduced in the Finance Act 2023, compared to the existing old regime (without exemptions).
2. Applicability and Default Regime:
   The new tax regime is applicable for individuals other than companies and firms. It serves as the default tax regime starting from the Financial Year 2023-24, with the corresponding Assessment Year being AY 2024-25.
3. Lower Tax Rates but Reduced Exemptions and Deductions:
   Under the new tax regime, tax rates are significantly lower. However, the benefit of various exemptions and deductions (except for standard deductions such as Rs. 50,000 from salary and Rs. 15,000 from family pension) is not available as in the old regime. Taxpayers can choose between the old and new tax regimes based on their perceived benefits.
4. Option for Opting Out:
   Taxpayers have the option to opt out of the new tax regime until filing their return for the Assessment Year 2024-25. Eligible individuals without any business income can choose the regime for each financial year, allowing them to switch between the old and new regimes as per their preference.
5. Income Tax Slabs under the New Regime:
   The income tax slabs under the new tax regime are structured as follows:

• Income from ₹0 to ₹3,00,000: Tax rate of 0%
• Income from ₹3,00,001 to ₹6,00,000: Tax rate of 5%
• Income from ₹6,00,001 to ₹9,00,000: Tax rate of 10%
• Income from ₹9,00,001 to ₹12,00,000: Tax rate of 15%
• Income from ₹12,00,001 to ₹15,00,001: Tax rate of 20%
• Income above ₹15,00,000: Tax rate of 30%

This clarification from the finance ministry aims to provide clarity and alleviate any misconceptions regarding the new tax regime introduced in the Union Budget. Taxpayers are encouraged to assess their individual circumstances and make informed decisions regarding their choice of tax regime for optimal financial management.