Check which income tax regime will suit you, details inside

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Here's a comprehensive look at how Nirmala Sitharaman's Budget 2023–2024 aims to simplify the new tax system for middle-class people. As a result, the government has revised income tax brackets and increased tax rebates to Rs 7 lakh from Rs 5 lakh in the past. 

Additionally, individuals with annual incomes of up to Rs 3 lakh will not be required to pay tax, as opposed to the earlier exemption limit of Rs 2.5 lakh. She also stated that the new tax system would be the default one.

Even though this seems appealing, will you actually save money on taxes if you choose the new tax system?

For instance, here is a comparison between the old (concessional) tax system for individuals earning Rs 10 lakh annually and the new (concessional) tax system, which has been further revised for the fiscal years 2023-2024.

For the purposes of CNBC-TV18.com, Bankbazaar.com compiled the following data, assuming that an individual earning Rs 10 lakh annually would take advantage of deductions and exemptions totaling at least Rs 4 lakh. These include the deduction from the standard deduction, the 80C, HRA, home loans, insurance premiums, NPS, 80G, education loans, and other similar deductions.

Under the old system (A), a person's taxable income would be Rs 6 lakh after deducting Rs 4 lakh in standard deductions and exemptions for an annual income of Rs 10 lakh. If this person went with the old system, they would have to pay Rs 33,800 in income tax.

If a person earns Rs 10 lakh per year and chooses the new system, which was implemented in 2020 and is also applicable to the current fiscal years 2022-2023, they will not be eligible for any exemptions or deductions. As a result, they still owe Rs 10 lakh in taxes on their entire income. They will have to pay a tax of Rs 78,000.

The person's taxable income will be Rs 9.5 lakh (Rs 10,00,000-50,000 standard deduction) if they choose the revised version of the new tax regime (C) for 2023, which takes effect in 2023-24. They are not eligible for any other deductions, such as the Rs 4 lakh assumed by the previous administration. As a result, this individual will have to pay Rs 54,600 in income tax.

*The standard deduction, HRA, 8OC, home loans, insurance premium, NPS, 80G, and an education loan deduction. etc., evaluated the Rs. 4 lakh # Deduction in comparison to the standard deduction Now comparing the three scenarios, a person earning Rs. 10 lakh would be required to pay Rs. 33,800 in tax under the previous system, Rs. 78,000 under the new system, and Rs. 54,600 under the revised new concessional regime (2023). 

Since the old system imposes the least amount of taxes on individuals, it seems fair in this instance.

Reiterating that Bankbazaar.com's tax calculation under the previous system assumed Rs 4 lakh in deductions and exemptions, which could be different for different people, resulting in different taxable income and tax payments.

 According to calculations made by Bankbazaar.com, those earning between Rs 8 lakh and Rs 10 lakh should continue to pay taxes under the old system. However, standard deductions and revised tax brackets cannot be denied to have made the new system more appealing than the previous one.

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