Ever since the Modi government introduced the New Tax Regime in the 2020 Budget, one of the most discussed topics among taxpayers has been which tax regime is better. The answer largely depends on an individual’s income level.
For instance, if someone earns up to Rs 7.5 lakh annually, they are better off under the New Tax Regime, as they won’t have to pay any tax. Additionally, salaried individuals benefit from not having to submit investment proofs to their employers to claim tax deductions.
For those in higher income brackets, such as Rs 15 lakh or Rs 20 lakh, choosing the right tax regime isn’t as straightforward. The decision depends on factors like investments and existing home loans. The key difference between the two regimes is that the Old Tax Regime allows various deductions and exemptions on certain expenses and investments, including home loans, which can significantly impact tax savings; while the New Tax Regime, barring Standard Deduction, doesn’t have those benefits for taxpayers.
Also read: Bring all taxpayers under New Tax Regime, remove all exemptions under old regime: SBI report suggests FM
Here’s a table comparing the Old Tax Regime and New Tax Regime after the July 2024 Budget:
CriteriaOld Tax RegimeNew Tax RegimeTax Slabs & RatesProgressive slabs with higher tax ratesLower tax rates with fewer slabsStandard DeductionRs 50,000 for salaried individuals & pensionersRs 75,000 for salaried individuals & pensionersExemptions & DeductionsAllows multiple deductions (80C, 80D, HRA, etc.)Minimal exemptions (only standard deduction and NPS employer contribution)Rebate under Section 87AFull tax rebate for income up to Rs 5 lakhFull tax rebate for income up to Rs 7.5 lakhInvestment Proof SubmissionRequired to claim deductionsNot required, making tax filing simplerHome Loan Interest (Section 24b)Deduction up to Rs 2 lakh allowedNo deduction available80C Deductions (PPF, ELSS, LIC, etc.)Allowed up to Rs 1.5 lakhNot applicableHealth Insurance Deduction (80D)Allowed (Rs 25,000-50,000)Not applicableSuitabilityBeneficial for those with high deductions & investmentsBetter for those with fewer investments and deductionsEase of FilingMore complex due to deductionsSimpler with no need for investment proof
Tax slabs under both the regimes:
Old Tax Regime:
Annual Income (Rs)Taxable Income After Standard DeductionTax RateTax CalculationUp to 2,50,000No tax (exempt)0%Rs 02,50,001 – 5,00,000Up to Rs 4,50,000 after deduction5%5% on income above Rs 2,50,0005,00,001 – » Read More
