Facts vs Fiction: Clarification on misinformation circulating about new tax regime

Misleading information regarding the new tax regime is circulating on certain social media platforms. To clarify, the new regime under section 115BAC(1A) was introduced in the Finance Act 2023, as compared to the existing old regime (without exemptions).

This regime is applicable for persons excluding companies and firms, as a default regime from the financial year 2023-24.

The corresponding assessment year is AY 2024-25. The new tax regime offers significantly lower tax rates, albeit the benefit of various exemptions and deductions, apart from a standard deduction of Rs. 50,000 from salary and Rs. 15,000 from family pension, is not available, as in the old regime.

Although the new tax regime is the default, tax payers have the option to choose the regime that suits them best. The option to opt out from the new tax regime is available until the filing of return for AY 2024-25.

Eligible persons without any business income can choose the regime for each financial year, giving them the flexibility to switch between the new and old tax regimes. There are no new changes coming into effect from today (April 1).