In the current financial year 2023-24, the newly introduced tax regime is garnering widespread approval.
The system offers an exemption on incomes up to Rs 7 lakh.
A remarkable 5.5 crore taxpayers have already chosen this option, primarily those with incomes below Rs 7 lakh.
Simplified Tax Path
Government sources affirm that the appeal of the new tax system is unsurprising.
Taxpayers with annual earnings ranging from 7.5 to 10 lakh prefer the straightforward income tax approach the new system provides.
Budget 2023-24 Brings Tax Relief
Finance Minister Nirmala Sitharaman’s budget announcement for 2023-24 introduced income tax relief.
While the existing tax system remains unchanged, the new system’s exemption limit was raised to Rs 7 lakh, up from Rs 5 lakh.
As a result, individuals earning up to Rs 7 lakh annually are exempt from taxation.
Additional Tax Benefits
Under the provisions of the 2023 Finance Act, an added relief of Rs 27,000 has been granted, effectively rendering total income up to Rs 7.27 lakh tax-free.
Flexibility for Taxpayers
Taxpayers who find the old tax system more advantageous can switch back to it.
The exact count of new system adopters for the current financial year will be known in the subsequent assessment year (2024-25).
Income Distribution
Recent data from the Income Tax Department of 2023 reveals that 4.84 crore taxpayers earned up to Rs 5 lakh, while 1.12 crore had a taxable income between Rs 5 lakh and Rs 10 lakh.
An estimated 47 lakh taxpayers reported an income between 10 to 20 lakhs. Additionally, 20 lakh taxpayers fell within the 20 to 50 lakh income range.
There were 3.8 lakh taxpayers with earnings between 50 lakh and 1 crore, and 2.6 lakh taxpayers reported incomes exceeding Rs 1 crore.
Comparing Tax Systems
In the new tax system, no tax is levied on incomes up to Rs 7.27 lakhs. However, this system doesn’t provide additional relaxations.
The old system, on the other hand, exempts income up to 2.5 lakhs and offers deductions for investments and other expenses as per the Income Tax Act provisions.
