Doesn't this discourage younger generation from savings. As the new regime has no exemption on savings

Ans: Likely to save in new tax regime in FY 23 24

Ans: Union Budget 2023 has hiked the maximum permissible investment in the senior citizens savings scheme. It is one of the most reputed investment scheme for elderly people. The monthly income scheme by post office has been more attractive now after Budget 2023.

Under the Senior Citizen Savings Scheme (SCSS), the maximum limit ranges from Rs.30 lakh to Rs.15 lakh. The scheme provides 8% interest per annum which will be paid on a quarterly basis.

Under Post Office Monthly Income Scheme (POMIS), the investment limit has been increased by Rs.9 lakh. Earlier, it was Rs.4.5 lakh. In case of joint accounts, the investment limit has been increased to Rs.15 lakh from Rs.9 lakh. The investors can earn interest of 7.1% per annum.

The revised new tax regime has introduced a standard deduction of Rs 50,000 for pensioners as well including family pensioners. Thus, a senior citizen pensioner may benefit under the revised new tax regime if they are unable to claim maximum deductions and exemptions for income tax outgo to remain the same in both tax regimes.

Senior citizen having gross income of Rs 7.5 lakh will have no tax liability in both the tax regime. This will happen if he/she is able to claim the maximum deductions and exemptions (including a standard deduction of Rs 50,000) of Rs 2.5 lakh in the old tax regime. By claiming deductions, the net taxable income will come down to Rs 5 lakh. This will make him/her eligible for a rebate of Rs 12,500 under section 87A in the old tax regime.

On the other hand, if the same pensioner opts for a new tax regime, then he/she can claim the standard deduction of Rs 50,000. This will bring down the net taxable income to Rs 7 lakh. This will make him/her eligible for a rebate under section 87A in the revised new tax regime.

If the pensioner has a gross income of Rs 10 lakh and is able to claim deductions exceeding Rs 3 lakh (such as section 80C, 80D, 80TTB etc., and a standard deduction of Rs 50,000), then the old income tax regime maybe beneficial for them.

In case of gross income of Rs 15 lakh, a pensioner is required to claim deductions of more than Rs 3,50,000 for continuing with the old tax regime in FY 2023-24.

So one can take either old or new tax regime depending on the above factors. I hope this was useful to you.

Ans: As an individual, you are supposed to plan for your future, keeping in view your requirements. Government may not encourage you for future savings, but you should go for savings, which yield better returns, for your future requirements.
Govt. wants more cash flow in the market so that more economic activity, more employment & many other objectives are achieved, from time to time.
Most welcome for any further clarifications. Thanks.

Ans: There is no change in old tax regime. All the benefits like HRA, Housing Loan, Insurance Premium etc are still available.