Comparison of Tax Regime: New Income Tax Regime likely to chose by 5.5 crore Taxpayers in FY24

New Vs. Old Tax Regime For FY24: Around 5.5 crore taxpayers may have migrated to the new tax regime in the current financial year, since the new income tax system has become more enticing for the financial year 2023-24 with a refund on income up to Rs.7 lakh, according to a senior government official.

According to the report, the majority of these taxpayers had taxable incomes of up to Rs.7 lakh.

“We see no reason why 55 million people won’t switch to the new tax system. Most young taxpayers earning around 7.5-8 lakh, or even up to 10 lakh, prefer flexible yet straightforward income tax filing,” stated the official.

Individual taxpayers, particularly those on salaries, would benefit from income tax relief, according to Finance Minister Nirmala Sitharaman’s Budget 2023-24. While the previous income tax regime remained unchanged, the new income tax regime boosted the refund from Rs.5 lakh to Rs.7 lakh. Individuals earning up to Rs.7 lakh are exempt from paying tax. Individuals earning up to Rs.7.27 lakh crore are exempt from tax under margin relief.

As per reports, an annual income of up to 7 lakh rupees is tax-free under the new system; however, the Finance Act, 2023 allows a 25,000 refund, allowing a marginal decrease of up to 27,000. For tax purposes, income up to Rs.7.27 lakh is deemed as equivalent to Rs.7 lakh, implying that it is tax-free.

Many taxpayers were keen to try new things in order to see whether the new tax regime was beneficial to them. According to the report, the official stated that people can return to the former tax regime if they find it more profitable.

Only in the next assessment year (2024-2025), when profits and tax liabilities for the current financial year are disclosed, would it be clear how many people have selected the new tax system, report indicated.

“According to the income tax department’s FY23 data, 4.84 crore taxpayers had taxable income of up to Rs.5 lakh. More than 1.12 crore persons had taxable income between Rs.5 lakh and Rs.10 lakh, while 47 lakh taxpayer had taxable income between Rs.10 lakh and Rs.20 lakh,” report mentioned.

Twenty lakh taxpayers had taxable income between Rs.20 lakh and Rs.50 lakh, while 3.8 lakh taxpayers had taxable income between Rs.50 lakh and Rs.1 crore. According to the data, 2.6 lakh people had taxable income of more than Rs.1 crore.