Finance Ministry clarifies on New Tax Regime for FY 23-24

Amidst the rampant dissemination of misinformation on various social media platforms regarding the implications of the newly introduced tax regime, the Finance Ministry has intervened with a concerted effort to rectify misunderstandings. In undertaking this initiative, the Ministry endeavors to comprehensively address the concerns raised and to furnish taxpayers with an accurate understanding of the recent tax reforms. Through this proactive approach, the Ministry seeks to dispel any confusion that may have arisen, thereby fostering greater clarity and confidence among taxpayers in navigating the evolving fiscal landscape.

A day before i-e on Sunday, 31st march 2024 Ministry of Finance issued the following statement on its "X" handle :

It has come to notice that misleading information related to new tax regime is being spread on some social media platforms. It is therefore clarified that:  

• There is no new change which is coming in from 01.04.2024.  

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

• 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 standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension) is not available, as in the old regime.

• New tax regime is the default tax regime, however, tax payers 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 new tax regime in one financial year and old tax regime in another year and vice versa.