No Income Tax Surprises From April 1: Govt Clarifies Doubts On Tax Regimes

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Beginning April 1, 2024 (FY 24-25), the ongoing tax regimes will remain unchanged, clarified the Ministry of Finance on Sunday. Despite speculations, there will be no alterations in the tax structure, whether direct or indirect, as announced in the interim budget for 2024-25 by Finance Minister Nirmala Sitharaman. Both the income tax slabs for the new and old regimes will remain consistent with those unveiled in the Union Budget for 2023-24.

Amidst reports of confusion circulating on certain social media platforms, the finance ministry issued a detailed clarification to address common doubts among taxpayers. The ministry emphasized that the new tax regime will continue to serve as the default tax regime. However, taxpayers retain the flexibility to choose between the old and new tax regimes based on their individual preferences and financial circumstances.

It is therefore clarified that:

• There is no new change from 01.04.2024.

• The new tax regime under section 115 BAC(1A) was introduced in the Finance Act 2023, as compared to the existing old regime (without exemptions)

• The new tax regime is applicable for persons other than companies and firms, is applicable as a default regime from the financial year 2023-24 and the assessment year corresponding to this is AY 2024-25.

• Under the new tax regime, the tax rates are significantly lower, though the benefit of various exemptions and deductions (other than the standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension) is not available, as in the old regime.

• The new tax regime is the default tax regime, however, taxpayers can choose the tax regime (old or new) that they think is beneficial to them.

Option for opting out from the new tax regime is available till filing of return for the AY 2024-25. Eligible persons without any business income will have the option to choose the regime for each financial year. So, they can choose a new tax regime in one financial year and an old tax regime in another year and vice versa.

With the government’s clarification, taxpayers can proceed with confidence knowing that there will be no unexpected changes to the tax regimes effective from April 1, 2024. The continuity in tax structures provides stability and allows individuals to plan their finances accordingly. It’s essential for taxpayers to stay informed and avoid misinformation circulating on social media platforms regarding tax policies.

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