After adding a sweetener to the new Income Tax regime, the Central Board of Income Tax (CBDT) has introduced a calculator on its website to assist the assessees in choosing between two regimes. The calculator can be accessed through this link.
Changes in the new regime are proposed to be applicable from the assessment year 2024-25 (Financial Year 2023-24). These changes will be effective once the Finance Bill 2023 is enacted, which includes raising the rebate to ₹7 lakh from ₹5 lakh and allowing the standard deduction. As earlier, exemptions under section 80 C of the Income Tax Act and other exemptions, such as interest payment on housing loan and premiums paid towards health insurance, will continue not to be allowed.
Read also: Budget 2023: Gap between old and new tax regime narrows
The calculator will first seek information about gross salary (after deducting allowances exempted under both regimes), amount deductible/exempt from Gross Salary (except standard deduction) which is not allowed in the new regime, income other than Salary and Special Rate Income, interest on self-occupied house property, deductions allowed under both regimes, i.e. 80CCH(2), 80CCD(2), 80JJAA, family pension deduction under section 57(iia) and deductions/exemptions (other than mentioned above) not eligible in the new tax regime.
Based on these inputs, the calculator will assess the amount under two heads – old and new regimes. Under both categories, it will minus allowed deductions (exemptions under old and standard deduction under new) and arrive at income from salaries. It will then consider income from self-occupied house property and income other than salary and special rate income. Accordingly, it will calculate gross total income an take out eligible deductions. Based on all these, it will give total tax liability under both regimes and also say what is gain or loss under the old regime, thus helping the assessee choose a tax regime.
Read more: Has the new Income tax regime become more attractive after Budget 2023?
The new Income-Tax regime is to be default option with effect from Assessment Year 2024-25 (Fiscal Year 2023-24). However, the choice to remain with the old tax regime will still be available for the taxpayer, but he will have to specify his option. The new regime, introduced in 2020, allows taxpayers to pay tax rates at lower rates, but only when they do not avail of any exemption such as tax benefit for investing in life or health insurance policies, depositing in small savings or repayment of housing loans, etc. The scheme failed to attract people. So, some changes have been made to widen its appeal and adoption.