New Tax Regime vs. Old: Which One Saves You More on Taxes?
Are you ready to file your Income Tax Returns for the Financial Year 2023-24? The due date for individuals is 31st July 2024. The Finance Bill, 2023 has introduced several attractive features in the New Tax Regime. Here’s a quick comparison to help you decide which regime benefits you the most.
Benefits of the New Tax Regime:
- Standard deduction of ₹50,000 for salaried employees.
- Attractive tax rates compared to the Old Tax Regime.
- No need to invest in Life Insurance, Health Insurance, PPF, Home Loans, etc., to save taxes.
- Zero tax for individuals with a total income up to ₹7 lakhs or salary up to ₹7.5 lakhs.
- Deduction to the extent of 2 lakh on Home Loan Interest paid on the property given on rent.
- Deductions for NPS contributions, gratuity, leave encashment, and contributions to the Agniveer Corpus Fund.
- Transportation allowance deduction for differently-abled individuals from salary.
- Tax exemption for Voluntary Retirement Scheme.
- Standard deduction for family pension up to ₹15,000 or 1/3rd of the pension amount, whichever is lower.
Benefits of the Old Tax Regime:
- Standard deduction of 50,000 for every salaried employee.
- Deduction available for professional tax paid on employment.
- Deductions under Chapter VIA (e.g., Life insurance premiums, health insurance premiums, principal repayment on home loans).
- Multiple exemptions (e.g., House Rent Allowance, Leave Travel Allowance, leave encashment, gratuity).
- Home Loan Interest paid is available on both self occupied and let out property with a overall limit of 2 lakh.
| Old Tax Regime | |
|---|---|
| Net Taxable Income | Tax Rate |
| Up to 2.5 Lakh | 5% on income which exceeds 2.5 Lakh |
| 2.5 Lakh to 5 Lakh | 5% on income which exceeds 2.5 Lakh |
| 5 Lakh to 10 Lakh | 20% on income which exceeds 5 Lakh |
| Above 10 Lakh | 30% on income which exceeds 10 Lakh |
| New Tax Regime | |
|---|---|
| Net Taxable Income | Tax Rate |
| Up to Rs. 3 Lakh | Nil |
| 3 Lakh to 6 Lakh | 5% on income which exceeds 3 Lakh |
| 6 Lakh to 9 Lakh | 10% on income which exceeds 6 Lakh |
| 9 Lakh to 12 Lakh | 15% on income which exceeds 9 Lakh |
| 12 Lakh to 15 Lakh | 20% on income which exceeds 12 Lakh |
| Above 15 Lakh | 30% on income which exceeds 15 Lakh |
Tax Comparision illustration for multiple income levels at levels of eligible deductions.
To Simplify:
- If your eligible deductions are more than ₹3.75 Lakhs, the Old Regime is beneficial.
- If your eligible deductions are less than ₹3.75 Lakhs and your income exceeds ₹15 Lakhs, the New Regime is beneficial.
Download our Excel Tax Calculator to see which regime is better for you. For expert assistance, reach out to us through WhatsApp.
