Have you also been stuck between the choice of a more beneficial tax regime?? Relax!! We have made it easier for you. You just need to enter your income details and all computations under old and new regimes would be done in fractions of seconds. Taking an informed decision by comparing tax payments under both the regimes has never been simpler, otherwise than with this free tool.
A new tax slab has been introduced in Budget 2020 that got effective from 1 April 2020. This new income tax slab offered lower tax rates but deductions and exemptions will not be available under the new regime except deduction u/s 80CCD(2). It allows you to lower your tax liability subject to certain conditions and is optional.
Comparison Of Old v/s New Tax regime Slab Rates for FY 2021-22, FY 2022-23 for FY 2022-23 and, FY 2023-24OldTax regime and New Tax regime Slab Rates for FY 2022-23
Income Tax Slab | New Tax Regime | Old Tax Regime |
---|---|---|
Upto Rs 2.5 Lakhs | Exempt | Exempt |
Rs 2.5- Rs 5 Lakhs | 5% | 5% |
Rs 5- Rs 7.5 Lakhs | 10% | 20% |
Rs 7.5 -Rs 10 Lakhs | 15% | 20% |
Rs 10 - Rs 12.5 Lakhs | 20% | 30% |
Rs 12.5 - Rs 15 Lakhs | 25% | 30% |
Above Rs 15 Lakhs | 30% | 30% |
Note: If the net taxable income(Gross Total Income - Chapter VIA deductions) of a salaried individual is up to INR 5 lakhs, they can enjoy the rebate under Section 87A of the Income Tax Act, 1961 under both the regimes. A rebate of INR 12,500 or the actual tax liability, whichever is lower would be allowed thereby making the tax liability zero.
OldTax regime and New Tax regime Slab Rates for FY 2023-24
There are no Changes in the Old Tax Regime however the Union Budget 2023-24 makes some changes in the New Tax Regime Slab Rates for FY 2023-24 and onwards. Now, The basic exemption limit has been raised to Rs 3 lakh from Rs 2.5 lakh to make the new tax regime more attractive. Also, the the No. of slabs reduced from 7 to 6 in the new tax regime. The income tax slab rates for FY 2023-24 (AY 2024-25) are as follows:
Old Regime Income Tax Slab
Up to Rs 2,50,000 NIL
Rs 2,50,001 - Rs 5,00,000 5% (tax rebate u/s 87A is available)
Rs 5,00,001 - Rs 10,00,000 20%
Above Rs 10,00,000 30%
Tax Slab | Tax Rate |
---|---|
Upto Rs 3,00,000 | Nil |
Rs. 3,00,001-6,00,000 | 5% |
Rs. 6,00,001-9,00,000 | 10% |
Rs. 9,00,001-12,00,000 | 15% |
Rs. 12,00,01-15,00,000 | 20% |
Above Rs. 15,00,001 | 30% |
A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes.
For a long time, it was demanded to increase the tax slabs and lower the tax rates. The Government thus introduced the new tax regime to give taxpayers the option to pay the lowest tax on their incomes. Since the new regime is optional, taxpayers can compare and choose the regime which is more beneficial for them in lowering their tax outgo.Under The new tax regime approximately 70 out of 100 exemptions are not available to make tax filing simple and easier for taxpayers so that they can calculate their tax liability themselves in an easy manner.
The budget has removed 70 of the available 100 exemptions. The following exemptions and deductions are some of the most important ones which would not be available if the new tax slab is chosen for tax calculation –
For more details pls check here. https://tax2win.in/guide/income-tax-slab-rates-updated
The following deductions and exemptions are still available under the new tax regime –
Ever since the new tax regime was proposed, many are debating as to which tax regime is
better, the old one with deductions or the new one without them? The answer is relative.
One tax regime cannot be universally beneficial for all. Your income, its type,
available deductions, and exemptions determine which tax regime would give you better
tax benefits. You should calculate your tax liability using both regimes and the regime
which gives you the lowest tax liability should be chosen depending on your
requirement.
Here are some calculations showing you the tax liability under both the
tax slabs for different types of incomes –
Salary Income of INR 12 lakhs for a salaried employee
Particulars | FY 2023-24 | FY 2022-23 | ||
---|---|---|---|---|
Old Regime | New Regime | Old Regime | New Regime | |
Gross Salary | 12,00,000 | 12,00,000 | 12,00,000 | 12,00,000 |
Less: HRA exemption | 2,00,000 | NA | 2,00,000 | NA |
Less: LTA exemption | 50,000 | NA | 50,000 | NA |
Less: Standard deduction | 50,000 | 50,000 | 50,000 | NA |
Less: Section 80C deductions | 1,50,000 | NA | 1,50,000 | NA |
Less: Section 80D deductions for self | 25,000 | NA | 25,000 | NA |
Less: Section 80D deduction for senior citizen parents | 50,000 | NA | 50,000 | NA |
Less: Other deductions | 10,000 | NA | 10,000 | NA |
Taxable Income | 6,65,000 | 11,50,000 | 6,65,000 | 12,00,000 |
Tax Payable including cess (considering age is less than 60) | 47,320 | 85,800 | 47,320 | 1,19,600 |
Remark | Old regime is beneficial | Old regime is beneficial |
Let us understand with another example :
Particulars | FY 2023-24 | FY 2022-23 | ||
---|---|---|---|---|
Old Regime | New Regime | Old Regime | New Regime | |
Gross Salary | 12,00,000 | 12,00,000 | 12,00,000 | 12,00,000 |
Less: Standard deduction | 50,000 | NA | 50,000 | NA |
Less: 80C deductions | 50,000 | 50,000 | 50,000 | NA |
Taxable Income | 11,00,000 | 11,50,000 | 11,00,000 | 12,00,000 |
Tax Payable including cess(considering age is less than 60) | 1,48,200 | 85,600 | 1,48,200 | 1,19,600 |
Remark | New regime is more beneficial | New regime is more beneficial |
So, a salaried employee can benefit from the old tax regime by claiming exemptions/ deductions. In case the taxpayer wants to claim more exemptions/ deductions then he should opt for the old tax regime subject to other conditions.
In the second example, since the exemptions/ deductions available to him were lower as compared to the previous example, it was more beneficial for him in opting for the new tax regime. Further, the decision of a suitable tax regime depends on case to case.
Some more examples showing taxability at different income levels:
Salary
Income: Rs.5,00,000 FY 2022-23
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 500,000 | 500,000 | |
Less : | Std. Ded. | 50,000 | - |
80C,80D, etc. | Zero | - | |
HRA | Zero | - | |
LTA | Zero | - | |
Net Taxable Income | 450,000 | 500,000 | |
Tax | - | - |
Note: There is NO impact on tax payments because of rebate u/s 87A.
Salary Income: Rs.5,00,000 FY 2023-24
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 500,000 | 500,000 | |
Less: | Std. Ded. | 50,000 | 50,000 |
80C,80D, etc. | Zero | - | |
HRA | Zero | - | |
LTA | Zero | - | |
Net Taxable Income | 450,000 | 450,000 | |
Tax | - | - |
Note: There is NO impact on tax payments because of rebate u/s 87A.
Salary Income: Rs.7,00,000 FY 2022-23
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 700,000 | 700,000 | |
Less: | Std. Ded. | 50,000 | - |
80C,80D, etc. | 150,000 | - | |
HRA | 50,000 | - | |
LTA | Zero | - | |
Net Taxable Income | 450,000 | 700,000 | |
Tax | 0 | 33,800 | |
Note: There is NO impact on tax payments under the old regime because of rebate u/s 87A. However Tax is payable under the new regime therefore the Old regime is more beneficial. |
Salary Income: Rs.7,00,000 FY 2023-24
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 700,000 | 700,000 | |
Less : | Std. Ded. | 50,000 | 50,000 |
80C,80D, etc. | 150,000 | - | |
HRA | 50,000 | - | |
LTA | Zero | - | |
Net Taxable Income | 450,000 | 650,000 | |
Tax | 0 | 0 | |
Note: There are tax payments under the old regime due to rebate u/s 87A and also under new regime also due to rebate u/s 87A as Introduced by Budget 2023 which says Income upto 7 lac is not taxable under the new Regime. |
Salary Income: Rs.7,00,000 FY 2022-23
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 700,000 | 700,000 | |
Less : | Std. Ded. | 50,000 | - |
80C,80D, etc. | - | - | |
HRA | - | - | |
LTA | - | - | |
Net Taxable Income | 650,000 | 700,000 | |
Tax | 44,200 | 33,800 | |
Note: New Tax Regime is more beneficial. |
Salary Income: Rs.7,00,000 FY 2023-24
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 700,000 | 700,000 | |
Less : | Std. Ded. | 50,000 | 50,000 |
80C,80D, etc. | - | - | |
HRA | - | - | |
LTA | - | - | |
Net Taxable Income | 650,000 | 650,000 | |
Tax | 44,200 | 0 | |
Note: Tax payable under old regime is Rs 44,200 however there is tax payments under New regime because of rebate u/s 87A as Introduced by Budget 2023 which says Income upto 7 lac is not taxable under the new Regime. |
Salary Income: Rs.8,00,000 FY 2022-23
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 800,000 | 800,000 | |
Less : | Std. Ded. | 50,000 | - |
80C,80D, etc. | 150,000 | - | |
HRA | 50,000 | - | |
LTA | Zero | - | |
Net Taxable Income | 550,000 | 800,000 | |
Tax | 23,400 | 46,800 | |
Old Tax Regime saves more tax. |
Salary Income: Rs.8,00,000 FY 2023-24
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 800,000 | 800,000 | |
Less : | Std. Ded. | 50,000 | 50,000 |
80C,80D, etc. | 150,000 | - | |
HRA | 50,000 | - | |
LTA | Zero | - | |
Net Taxable Income | 550,000 | 750,000 | |
Tax | 23,400 | 31,200 | |
Old Tax Regime saves more tax. |
Salary Income: Rs.15,00,000 FY 2022-23
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 1,500,000 | 1,500,000 | |
Less : | Std. Ded. | 50,000 | - |
80C,80D, etc. | 150,000 | - | |
HRA | 75,000 | - | |
LTA | 20,000 | - | |
Net Taxable Income | 1,205,000 | 1,500,000 | |
Tax | 180,960 | 195,000 | |
Old Tax Regime saves more tax. |
Salary Income: Rs.15,00,000 FY 2023-24
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 1,500,000 | 1,500,000 | |
Less : | Std. Ded. | 50,000 | 50,000 |
80C,80D, etc. | 150,000 | - | |
HRA | 75,000 | - | |
LTA | 20,000 | - | |
Net Taxable Income | 1,205,000 | 1,450,000 | |
Tax | 180,960 | 145,600 | |
New Tax Regime saves more tax. |
Salary Income : Rs.20,00,000 FY 2022-23
Particulars | Old Regime | New Regime | |
---|---|---|---|
Gross Income | 2,000,000 | 2,000,000 | |
Less : | Std. Ded. | 50,000 | - |
80C,80D, etc. | 150,000 | - | |
HRA | 75,000 | - | |
LTA | 20,000 | - | |
Net Taxable Income | 1,705,000 | 2,000,000 | |
Tax | 336,960 | 351,000 | |
Old Tax Regime saves more tax. |
Salary Income : Rs.20,00,000 FY 2023-24
Old Regime | New Regime | ||
---|---|---|---|
Gross Income | 2,000,000 | 2,000,000 | |
Less : | Std. Ded. | 50,000 | 50,000 |
80C,80D, etc. | 150,000 | - | |
HRA | 75,000 | - | |
LTA | 20,000 | - | |
Net Taxable Income | 1,705,000 | 1,950,000 | |
Tax | 336,960 | 296,400 | |
New Tax Regime saves more tax. |
Let's get a brief over some of the indifferent points between the old and new tax
regimes:
For FY 2022-23
Gross Income | Deductions and exemptions including Standard deduction | Tax under the old tax regime* | Tax under the new tax regime* |
---|---|---|---|
INR 8,00,000 | INR 1,38,000 | INR 47,000 | INR 47,000 |
INR 10,00,000 | INR 1,88,000 | INR 78,000 | INR 78,000 |
INR 12,00,000 | INR 1,91,000 | INR 1,20,000 | INR 1,20,000 |
INR 15,00,000 | INR 2,50,000 | INR 1,95,000 | INR 1,95,000 |
*Tax amount has been rounded off to the nearest thousands
For FY 2023-24
Gross Annual Income | Deductions and exemptions including Standard deduction | Tax under old regime | Tax under New tax regime* |
---|---|---|---|
INR 8,00,000 | INR 2,12,500 | INR 31,000 | INR 31,000 |
INR 10,00,000 | INR 3,00,000 | INR 55,000 | INR 55,000 |
INR 12,00,000 | INR 3,50,000 | INR 86,000 | INR 86,000 |
INR 15,00,000 | INR 4,08,000 | INR 1,46,000 | INR 1,46,000 |
*Tax amount has been rounded off to the nearest thousands
In the cases mentioned above, the taxpayer will be indifferent to both schemes. Both schemes will result in approximately the same amount of tax.
The various benefits or disadvantages of the old and new tax regimes include:-
Benefits | Disadvantages |
---|---|
OLD TAX REGIME | |
Option to avail around 70 exemptions and deductions under the Income Tax Act | Investment only in specified options were required to claim the tax benefit. |
Practice to submit false disclosures for investment proofs is prevalent | |
NEW TAX REGIME | |
Tax Rates Reduced | Not attractive to those who were already investing and have binding premiums |
No major tax saving options given, increasing cash flow in hands of taxpayer |
The bottom line
The bottom line comes down to numbers. Before deciding on which
regime is suitable for you, you need to calculate your tax liability under both regimes
with and without deductions and exemptions. The regime which gives you the lowest tax
liability would be better depending on your requirements. Mrs. Sitharaman has given you
the choice of reducing your tax liability in any way possible and so, the onus is on you
to find out which regime works better for you.
Yes, a salaried individual can make a choice every year as to which tax regime should be chosen. There is no compulsion if one scheme is selected for a year then it should adhere every year. Taxpayers can switch amongst the schemes yearly.
New tax regime is more beneficial, particularly for those who have not invested and are not looking forward to making an investment in tax saving options eligible under the old scheme. This option is more lucrative for new joiners or senior citizens willing to have more liquidity in hands compared to investments.
House Rent Allowance or HRA exemption is not available under the new tax regime pronounced in Budget 2020.
Tax under the new regime can be calculated as per the income tax slabs rates prescribed or with the help of an income tax calculator.
The choice of opting for the new tax regime shall depend upon your willingness to make tax saving investments. In case you are a rental income earner and you are not looking forward to making any tax-deductible contributions then you should preferably opt for the new tax regime. Still, it would be suggested to take a more informed decision by calculating your tax liability under both regimes.