FAQ of New Tax Regime

Q: What is the new Tax Regime?

A: A new Section 115BAC was inserted under the Finance Act,2020 (Modified vide Finance Bill
2023) to provide an alternative to individuals to pay tax at lower concessional rates. Option
under this scheme can be exercised by every individual. The income under this new scheme
shall be computed without claiming any regular exemptions / deductions like HRA Rebate,
home loan interest, investments under Chapter VIA etc.

Q: Who can opt for New Tax Regime?

A: Only individuals and Hindu Undivided Families (HUFs) can opt for the new tax regime. In other
words, partnership firms, companies, Association of Persons, Juridical persons, and trusts
cannot opt for this tax regime.

Q: Are there any changes in the New Tax Regime for FY 24 when compared to last year’s (FY 23)?
A: The New tax regime was introduced through the Union Budget, 2020. It has undergone
multiple changes through the Union Budgets every year. Below are the changes made for the
year FY 2023-24 effective 01 April 2023

1. Default Tax Regime

a. The New Tax Regime will now be the default tax regime. However, taxpayers have
an option to choose the Old tax regime. In case, Employee doesn’t opt for any tax
regime, then, New tax regime will be considered by default.

2. Standard Deduction
a. In the previous year New tax regime, there was no provision for the standard
deduction. Effective April 2023, taxpayers can claim the standard deduction of
Rs.50,000 per annum.

3. Changes in Income tax slabs

a. Refer the table in the next question

4. Basic Exemption limit

a. In the New tax regime, the basic exemption limit has been increased from Rs. 2.5
lacs to Rs. 3 lacs. This limit remains the same under the old tax regime which is Rs.
2.5 lacs.
 5. Rebate u/ 87A
a. The rebate limit under the New tax regime has been increased to Rs. 7 lacs from Rs.
5 lacs. If the person opting for the new tax regime has a taxable income below Rs. 7
lacs, then he/she will have to pay zero tax on his/her income. Under the old tax
regime, this limit remains at Rs. 5 lacs.

6. Marginal Relief
a. Marginal relief has been introduced for Employees whose Income exceeds Rs.7 lakhs
per annum (Exceeding the threshold limit).
b. The concept of marginal relief is designed to provide relaxation from levy of Income
tax and surcharge to a taxpayer where the total income exceeds marginally above
Rs.7 lakhs, Rs. 50 lakhs, Rs. 1 crore and Rs.2 crore.
c. The Marginal relief on Rs.7 lakhs is applicable to New tax regime only .

7. Surcharge
a. In the New tax regime, the maximum surcharge rate is now reduced to 25% from
37%. This rate remains the same under the old tax regime as it was earlier i.e., 37%.

Q: What are the income tax slabs applicable for this Financial Year under Old and New tax
regime?
A: The tax slabs have been revised under the new tax regime. The new Income tax slabs under
new tax regime for FY 2023-24 (AY 2024-25) is:

New Regime Tot. Tax Rate

Tax Rate Surcharge Education Cess
Taxable Income (₹) Sur./Cess
Up to 3,00,000 - - - -
3,00,001 - 600,000 5% - 4% 5.20%
600,001 - 9,00,000 10% - 4% 10.40%
9,00,001 - 12,00,000 15% - 4% 15.60%
12,0,001 - 15,00,000 20% - 4% 20.80%
1,500,001 - 5,000,000 30% - 4% 31.20%
5,000,001 - 1 Crore 30% 10% 4% 34.32%
1 Crore - 2 Crore 30% 15% 4% 35.88%
Above 2 Crore 30% 25% 4% 39.00%

Old Regime Tot. Tax Rate

Tax Rate Surcharge Education Cess
Taxable Income (₹) Sur./Cess
Up to 250,000 - - - -
250,001 - 500,000 5% - 4% 5.20%
500,001 - 10,00,000 20% - 4% 20.80%
10,00,001 - 50,00,000 30% - 4% 31.20%
5,000,001 - 1 crore 30% 10% 4% 34.32%
1 Crore - 2 Crore 30% 15% 4% 35.88%
2 Crore - 5 Crore 30% 25% 4% 39.00%
 Above 5 Crore 30% 37% 4% 42.74%

Q: What is the Marginal Relief under New Tax Regime exceeding Rs.7 lakhs?
A: The Finance Bill 2023 has offered a marginal relief for followers of the new tax regime, reducing
the tax liability for individuals whose taxable income marginally exceeds Rs 7 lakh

Q: Can you share some examples on Marginal Relief?

A: Find enclosed the below table with some case studies for easy understanding of Marginal
Relief.

Particulars Case Study - 1 Case Study - 2 Case Study - 3 Case Study - 4 Case Study - 5
Effective Tax-Free Salary income (A) ₹ 7,50,000 ₹ 7,55,000 ₹ 7,60,000 ₹ 7,70,000 ₹ 7,77,778
Less : Standard Deduction (B) ₹ 50,000 ₹ 50,000 ₹ 50,000 ₹ 50,000 ₹ 50,000
Gross Total Income (C = A-B) ₹ 7,00,000 ₹ 7,05,000 ₹ 7,10,000 ₹ 7,20,000 ₹ 7,27,778

Less : Chapter VI-A deductions (D) ₹0 ₹0 ₹0 ₹0 ₹0

Taxable Income level for Rebate eligibility (C-D) ₹ 7,00,000 ₹ 7,05,000 ₹ 7,10,000 ₹ 7,20,000 ₹ 7,27,778
Income Tax on above Income (as per slab rates) (E) ₹ 25,000 ₹ 25,500 ₹ 26,000 ₹ 27,000 ₹ 27,778
Less: Rebate under Section 87A (F) ₹ -25,000 ₹0 ₹0 ₹0 ₹0
Income tax payable (G) ₹0 ₹ 25,500 ₹ 26,000 ₹ 27,000 ₹ 27,778

Marginal Increase in Income exceeding Rs.7 lakhs (H) ₹0 ₹ 5,000 ₹ 10,000 ₹ 20,000 ₹ 27,778

Marginal Relief (G – H) ₹0 ₹ 20,500 ₹ 16,000 ₹ 7,000 ₹0

Income tax payable post Marginal Relief ( I ) ₹0 ₹ 5,000 ₹ 10,000 ₹ 20,000 ₹ 27,778

Add : Education Cess on Income Tax @ 4% ( J ) ₹0 ₹ 200 ₹ 400 ₹ 800 ₹ 1,111

Total Income Tax Payable for the year ( I + J ) ₹0 ₹ 5,200 ₹ 10,400 ₹ 20,800 ₹ 28,889

Q: How do I choose the Optimum Regime, basis my Salary Income and Proposed Investments?
A: There is no standard rule to determine the optimum tax regime that is applicable to everyone.
The Employee Self Service Link (ESS) in HGS Portal provides a Basic Tax Simulator, which guides
you to determine the impact of opting for a particular Tax Regime basis your planned
investments.

Q: How do I communicate my option i.e. Old Tax Regime OR New Tax Regime, so that tax may
be computed accordingly in my monthly salary?
A: The Employee Self Service Link (ESS) of HGS Portal, provides a Regime Option Page, which
allows you to choose an Old Tax Regime (New Tax Regime will be by default) and submit the
same to be considered in your monthly tax calculation.
Q: What is the impact of choosing / opting for the New Tax Regime?
A: In case, you opt for the New Tax Regime, Tax on Salary shall be computed by applying the
concessional rates of tax (NPTR) on the Net Taxable Income.

It is critical to note that, Net Taxable Income under the New Tax Regime is computed without
considering any exemptions / deductions, as currently applicable under the Old Regime
- HRA Rebate
- LTA exemption
- Profession Tax deduction
- Housing Benefit (Interest on Housing Loan / Loss on Let out Property)
- Investments U/s 80C and Chapter VIA (Mediclaim premium, Education Loan interest
etc.)
- Meal card exemption

Deductions considered in New Regime

- Standard deduction for salaried individuals up to Rs 50,000
- Interest on Home Loan u/s 24b on: Let-out property (The output should be an
Income)
- Employer's contribution to NPS

Q: For the purpose of monthly tax calculation, can I change my choice of Tax Regime, during the
course of the year?
A: You will have only one chance to choose and submit the Tax Regime during the year. Old Tax
Regime, once opted by you is not liable to be modified during that year.

Q: How will my monthly tax be computed, in case, I fail to choose an appropriate Tax Regime on
the ESS link?
A: In the absence of any declaration by you, TDS would be computed as per the New Tax Regime
(Till F.Y. 2022-23, the default regime was Old Tax Regime).

Q: Does this mean that I lose any benefit that is due to me under the optimum Tax Regime, in
case, I have made a wrong option submission?
A: The Tax guidelines provide for an individual to update or change the tax regime at the time of
filing tax return in the prescribed manner. Consequently, any excess tax recovered by the
employer under an alternative regime can be claimed as a refund in your Personal Income Tax
Return (ITR)

Q: Once I have intimated my choice of Tax Regime in the current year, am I supposed to retain
the same regime in subsequent financial years?
A: Tax Regime (New / Old), once opted by you is not liable to be modified during that year.
However, you are free to choose an alternative regime in the subsequent year/years.
Q: How do I submit details of my investments towards Insurance Premium, PPF and Rent for
HRA Rebate?
A: You are required to submit details of your personal investments with respect to HRA, Section 24
(Housing Interest), Section 80C (Insurance Premium, PPF, NSC, ELSS etc.) and Others in the
normal course on the Investment Declaration on the ESS link.
Please note that these exemptions / deductions will be considered for computation only if you
have opted for the Old Tax Regime.

Q: I am a New Joiner, post April and I have already shared my choice with my previous
employer. Do I need to submit the same to my current employer also?
A: Irrespective of any submission to your previous employer, you are mandated to provide a fresh
declaration to your current employer towards the Regime opted by you. The same will be
considered for calculation of tax liability on your consolidated salary income (including Gross
Salary from previous employment, if any) as shared with your current employer.

Q: Under OAAR 2, I have blocked Tax-free entitlement towards LTA and Meal Coupons.
Thereafter, I have opted for the New tax Regime, under which exemptions towards LTA and
Meal Coupons is not available. How can I reverse my OAAR 2 Option?
A: OAAR 2 and tax-free entitlements opted by you, are not liable to be modified or reversed. You
are requested to revalidate your OAAR 2 and tax plan, before you opt for the New Tax Regime.
In such a scenario, the OAAR 2 entitlements towards LTA / Meal Card shall continue to be
processed, as in the normal course, without any attached tax exemption.

Q: Is the Rebate u/s 87A applicable under New Regime also?

A: Yes, Rebate u/s 87A of Rs. 25,000 is also applicable under New Regime if the Net taxable
Income is less than Rs 7 Lakhs. (For Old Tax Regime, rebate u/s 87A continues to be Rs 12,500 if
the Net Taxable Income is less than Rs 5 lakhs)

Q: What are the advantages of the New tax regime?

A: Under the new tax regime, you don’t need to keep track of rent receipts, travel tickets and tax
planning components. The new tax regime offers lower tax rates and fewer deductions.

Q: Who cannot switch between the two regimes every year?

A: As per income tax laws, taxpayers having business income are not eligible to choose between
the existing tax regime and new tax regime every year. This would mean that salaried
individuals and pensioners would be eligible to switch between new tax regime and old tax
regime as per their convenience every year provided they don't have business income.
Q: Will I receive an exemption on leave encashment under the New tax regime?
A: Yes. Exemption on leave encashment is available under the New tax regime. In Budget 2023,
the exemption threshold for leave encashment has been increased to Rs.25 lakhs for non-
government Employees. Thus, at the time of retirement, leave encashment of upto Rs.25 lakhs
is tax-free under Section 10(10AA)

Q: Will I be able to declare proposed investments under New Tax Regime?

A: HGS Team has enabled the New Income Tax Regime as default tax regime for all the
Employees. In the New tax Regime, you can declare only Previous Employer Income (For New
Joiners joining during FY 2023-24) and Additional income, If any. Only two tabs will be enabled
for you.

However, if you are opting for Old tax regime, then, all the other investments tab will be
enabled automatically (Investments under Section 80C, Other than 80C, HRA, Home loan,
Previous Employer Income, Additional Income)

Q: How do I select the Old Regime?

A: Employees who wish to opt for Old Regime, will have to login into HGS Portal and choose the
Old Tax Regime. Once you change and opt for Old Tax Regime, the same cannot be changed or
modified later during the financial year.

Follow the below steps to change the tax regime from New Regime to Old Regime
 Login into HGS Portal and go to Dashboard
 Select Tax Declaration
 Current status shows New Regime as default
 Click on the change status button. A new window appears with Old and New Regime.
 Select the Old Regime and click on the Confirm button