Choosing between the old and new taxation regimes in India is a crucial decision to make since they have different impacts on your tax liability. While the old regime has its perks in the form of 70+ deductions and exemptions, the new tax regime offers some great benefits, too.
To understand what both these regimes mean, their differences and how you can choose between them, read on.
Introduced in 2020, this has comparatively fewer deductions and exemptions but better tax slabs.
Important points to note:
The old regime has been in place long before the new one.
Important points to note:
Understanding the tax slabs, deductions and exemptions for both regimes is crucial. This information can help you understand the features of the old vs. new tax regime and make a smart choice.
Tax Slabs:
| Income Slab | New Tax Regime | Old Tax Regime |
|---|---|---|
| ₹0 – ₹2,50,000 | 0% | 0% |
| ₹2,50,000 – ₹3,00,000 | 0% | 5% |
| ₹3,00,000 – ₹5,00,000 | 5% | 5% |
| ₹5,00,000 – ₹6,00,000 | 5% | 20% |
| ₹6,00,000 – ₹7,50,000 | 10% | 20% |
| ₹7,50,000 – ₹9,00,000 | 10% | 20% |
| ₹9,00,000 – ₹10,00,000 | 15% | 20% |
| ₹10,00,000 – ₹12,00,000 | 15% | 30% |
| ₹12,00,000 – ₹12,50,000 | 20% | 30% |
| ₹12,50,000 – ₹15,00,000 | 20% | 30% |
| ₹15,00,000 | 30% | 30% |
Disclaimer: The tax slabs for the new regime are applicable from 01/04/2023.
Deductions and Exemptions:
| Particulars | New Tax Regime | Old Tax Regime |
|---|---|---|
| Standard deduction | Available | Available |
| HRA | Not Available | Available |
| LTA | Not Available | Available |
| Interest on home loan | Not Available (self-occupied/vacant property)Available (let-out property) | Available |
| NPS (employer contribution) | Available | Available |
| Family Pension Income Deduction | Available | Available |
| Conveyance | Available | Available |
| Entertainment Allowance and Professional Tax | Not Available | Available |
| Deductions u/s 80C | Not Available | Available |
Disclaimer: The above is not an exhaustive list of deductions and exemptions.
A key difference between the new and old tax regime includes:
To consider the old vs new regime, calculate your tax liability by considering all the deductions and exemptions you can claim under both regimes. This will give you your net taxable income. Based on that, you can calculate the tax you owe as per the applicable slab rate.
In conclusion, computing your tax obligation will help you choose between the old or new tax regime with ease. You can also claim deductions for a personal loan under the old regime if you use the funds for specified purposes.
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This answer will vary based on your unique situation. Compare the old vs new tax regime based on your earnings and the deductions you can claim. Then, choose the regime that lowers your tax liability.
If you have an annual income of ₹15 lakhs, compare the old vs new tax regime based on the deductions you claim. For example, if your deductions go above ₹3.58 lakhs, you may benefit from the old regime. If not, the new regime may be a better option.
With an income of ₹22 lakhs, you can computer your tax obligation as per the old regime vs the new regime based on the deductions that reduce your taxes. With a deduction of ₹4.25 lakhs, your liability in both regimes is the same.
However, if you can get a higher amount as a deduction, the old regime can help you pay less tax.
The benefits under the new regime include:
Here’s what you need to know:
As an individual earning a monthly income, you can choose a preferred option that best suits your needs. The ideal slab you choose must be based on:
Yes, you can switch between new and old regimes annually. However, from 2023-24 onwards, the new regime is the default regime. To file returns under the old regime, you’ll have to:
This is all that you need to do:
