All about the New tax regime for AY 2024-25

The Income tax department has released the utilities and forms for the filing of Income tax returns for the AY 2024-25. For the filing of Income tax returns by Individuals, HUF, AOP and BOI, the respective forms have been released by the Income tax department way. So, in this season, there are following changes that we will be looking forward while filing the Income tax returns for the Individuals, HUF, AOP and BOI.

1. Default Income tax regime

Upto the AY 2023-24, the Old tax regime would be the default tax regime for the Individual and HUF. But in the AY 2024-25, the New tax regime shall be the default tax regime for the Individuals, HUF, AOP and BOI. Also, the tax slabs have been increased in the AY 2024-25 for the benefit of the Assessee.

Upto AY 2023-24

From AY 2024-25

If the Assessee wants to opt out from the new tax regime, then the assesse can avail the option available under section 115BAC(6). The Assessee shall have to file the Form 10-IEA on or before the due date of filing the Income tax return. If the Assessee has opted out from the New tax regime then in the subsequent previous years, the assesse can only once in a lifetime can switch back to the New tax regime. And if the Assessee has re-opted for the New tax regime, then the assesse can not move back to the Old tax regime again.

2. Standard deduction under the head salary

Upto AY 2023-24, the standard deduction under the head salaries is not available in the New tax regime but from AY 2024-25 onwards, the standard deduction of Rs. 50,000/- is available for the assessee.

3. Relief under 87A

Upto the AY 2023-24, the relief u/s. 87A is available upto Rs. 5,00,000/- in both the old and new tax regime. For the AY 2024-25, the relief u/s. 87A has been extended to Rs. 7,00,000/- in the New tax regime. While for the old tax regime, the rebate u/s. 87A stands unchanged for the AY 2024-25.

4. Marginal Relief

In the AY 2024-25, the marginal relief under new tax regime has been introduced. In the said marginal relief, if the income exceeds the limit of Rs. 7,00,000/- and tax payable on such income is exceeding the amount over and above the limit of Rs. 7,00,000/- then the tax will be limited to the extent of such income exceeding Rs. 7 Lakhs. To put into a simple language, let’s understand this in a step wise basis:-

Step I – Calculate whether the income exceeds Rs. 7,00,000/- and by how much amount.

Step II – Calculate the Income tax liability on the actual income

Step III – If the tax amount as calculated under step II is greater that excess amount over Rs. 7,00,000/- as calculated in Step I, then marginal relief is available

Let us understand this with the help of some tabular examples:-