May 2023

Important Amendments by the Finance Act, 2023

This article, divided into 4 parts, summarises key amendments carried out to the Income-tax Act, 1961 by the Finance Act, 2023. Due to space constraints, instead of dealing with all amendments, the focus is only on important amendments with a detailed analysis. This will provide the readers with more food for thought on these important amendments. - Editor

PART I  |  NEW Vs. OLD TAX REGIME w.e.f. AY 2024-25

Dinesh S. Chawla, Aditi Tibrewala
Chartered Accountants

“The old order changeth yielding place to new and God fulfils himself in many ways lest one good custom should corrupt the world”.

Lord Alfred Tennyson wrote these famous lines several decades back.

In the present context, the old order in the world of Income tax in India is changing. And it is changing very fast. The new order is here in the form of the “new tax regime”. The new regime that was brought in vide the Finance Act 2020 has already been replaced now by a newer tax regime vide Finance Act 2023.

This article aims at simplifying the newest new tax regime for readers while comparing it with the erstwhile “old” regime.


The Indian Government has introduced an updated new tax regime that will come into effect from AY 2024-25. This new regime can be exercised by Individuals, HUF, AOP (other than co-operative societies), BOI, and AJP (Artificial Juridical Person) under Sec 115BAC.

This new regime is a departure from the erstwhile regime that has been in place for several decades.

The 5 major amendments that affect the common man are:

1. Rebate limit increased from Rs. 5 lakh to Rs. 7 lakh;

2. Tax Slabs updated to 5 slabs with new rates (as given below);

3. Standard deduction for salaried tax payers would now be available even under the new regime;

4. Reduction in the top rate of surcharge from 37% to 25%, bringing the effective tax rate to 39% as compared to the erstwhile 42.74%;

5. Leave encashment limit for non-government salaried employees enhanced to Rs. 25 lakhs.


New Tax Regime (Default Regime, w.e.f. AY 2024-25)

As per the amended law, the new regime has become the default regime w.e.f. AY 2024-25. Any taxpayer who wishes to continue to stay in the old tax regime will have to opt-out of the new regime. In the original avatar of the new tax regime, the situation was exactly the opposite whereby the old regime was the default regime and anyone wanting to opt f


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