A tax regime is a set of laws governing the imposition and computation of taxation. Tax regimes vary widely based on the types of taxes covered, the tax bases covered, exemptions from tax allowed, and the tax calculation method employed for a particular taxpayer.
Tax compliance is defined as the taxpayers’ decision to comply with tax laws and regulations. It usually involves paying the right taxes on time, keeping in mind the state, federal and international tax laws. A taxpayer’s inability to pay the taxes on time may result in penalization.
There are two major types of taxes in India – Direct taxes and Indirect taxes.
Direct tax is the tax you directly pay to the authority that imposes tax like income tax. Income tax is imposed by the government, so you must pay it to them. It is the same with corporation tax, wealth tax, capital gains tax, securities transaction tax.
Indirect taxes are levied on goods and services. Indirect taxes include GST on products or services, sales tax, excise duty and VAT, service tax, custom duty. In the case of indirect tax, there is an intermediary who collects the tax on behalf of the government.
It is crucial for every working professional to comply with the tax laws imposed by the government and other regulatory authorities. To ensure tax compliance, there are several ways that one can follow.
Failing to ensure tax compliance can lead to legal action. Therefore, it is crucial to ensure that you comply with the tax laws and regulations to avoid any legal complications.
| Income Tax Slabs | Old Tax Regime | New Regime | ||
| Citizens below 60 years | Senior citizens above 60 years | Super senior citizens above 80 years | All categories | |
| Rs 0–2.5 lakhs | No Tax | No Tax | No Tax | No Tax |
| Rs 2.5–3 lakhs | 5% rebate under Section 87 a | No Tax | No Tax | 5% rebate under Section 87 a |
| Rs 3–5 lakhs | 5% rebate under Section 87 a | No Tax | ||
| Rs 5–7.5 lakhs | 20% | 20% | 20% | 10% |
| Rs 7.5–10 lakhs | 20% | 20% | 20% | 15% |
| Rs 10–12.5 lakhs | 30% | 30% | 30% | 20% |
| Rs 12.5–15 lakhs | 30% | 30% | 30% | 25% |
| Rs 15 lakhs and above | 30% | 30% | 30% | 30% |
The Indian government introduced some significant changes to the income tax regime in 2023, aimed at providing relief to taxpayers and simplifying the tax filing process.
One of the most notable changes is the increase in income tax rebate limit from Rs 5 Lakh to Rs 7 Lakh under the new regime.
Additionally, the tax slab has been increased to Rs 3 Lakhs, providing tax relief to a larger section of the population.
Moreover, the average processing period for income tax returns has been reduced from 93 days to 16 days, making the filing process more efficient and less time-consuming for taxpayers.
Furthermore, the highest surcharge rate has been reduced from 37% to 25% under the new regime, providing significant relief to taxpayers in the highest income bracket.
Additionally, salaried employees earning 15.5 Lakh or more shall get standard deduction benefit of 52,500, which is a considerable relief for those earning higher salaries.
The tax exemption on leave encashment has been increased to 25 Lakhs from 3 Lakhs for non-government salaried employees, providing significant relief to those who receive this benefit.
It is important to note that while taxpayers can choose to use the benefit of the old regime, the new regime will be the default regime going forward.
Overall, these changes are expected to simplify the tax filing process and provide relief to taxpayers, especially those in the higher income bracket.
In 2023 India introduced a new tax regime that offers reduced tax rates. The rates are structured as follows: No tax on income up to Rs 3 lakh. 5% tax on income between Rs 3 lakh and Rs 5 lakh. 20% tax on income between Rs 5 lakh and Rs 10 lakh, and 30% tax on yearly income of 10 lakhs and above.
The new regime is more beneficial unless you utilize deductions exceeding Rs 3.75 lakhs. So, it is better for workers with low income. But the old regime offers more room for tax planning and higher deductions.
Yes, you as a salaried individual can choose the tax regime which suits them the best. An employee can choose a different regime while filing their ITR than the regime opted by the employer while filing TDS.
If you want to opt for the new tax regime rather than the default (old) tax regime you can fill out Form 10IE.
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