Hello readers, as we all know financial year 2023-24 is going to end —so lets discuss today New Tax regime and Old tax regime in simplified manner-
As we all know up to last year Old Tax regime was Default Scheme and if assessee has to opt for new scheme he can do so by filling form 10IE but from FY 2023-24 and onwards New Tax Regime will be default scheme and if assessee has to opt for Old scheme he has to file form 10IEA.
Now let us discuss about New Tax slab Rates-
| Slabs (in Rs) | Tax Rates |
| Up to Rs 300000 | Nil |
| 300001-600000 | 5% |
| 600001-900000 | 10% |
| 900001-1200000 | 15% |
| 1200001-1500000 | 20% |
| Above 1500001 | 30% |
Rebate of Income Tax under Section 87A
Under New tax regime if taxable income of an individual does not exceed Rs 700000 then Individual can claim rebate up to Rs 25000. But this benefit of deduction is restricted to Rs 500000 under old tax regime I,e up to Rs 12500 .
Reduced surcharge on Income above Rs 5 crores has been reduced from 37 % to 25 %.
There was no change in slab rates under Old tax regime . Lets have a look –
| Slabs (in Rs) | Tax Rates |
| Up to Rs 250000 | Nil |
| 250001-500000 | 5% |
| 500001-1000000 | 20% |
| Above 100000 | 30% |
Now let us discuss deductions available under New Tax regime and Old Tax regime:
| Deductions | Old Tax Regime | New Tax Regime |
| Standard Deduction from salary | Yes | Yes |
| Deduction u/s 80C | Yes | No |
| NPS Self Contribution u/s 80CCD(IB) | Yes | No |
| NPS Self Contribution u/s 80CCD(2) | Yes | Yes |
| Medical Insurance u/s80 D | Yes | No |
| Interest on Education Loan u/s 80E | Yes | No |
| Interest on Vehicle Loan U/s 80EEB | Yes | No |
| Leave Encashment u/s 10(10AA) | Yes | Yes |
| Deduction in respect of Family pension -15000 or 1/3 rd of pension which ever is lower | Yes | Ye.
2s |
| Saving Bank Interest u/s 80TTA & 80TTB | Yes | No |
| HRA Exemption | Yes | No |
| LTA | Yes | No |
| Interest on Home Loan ( Self occupied) u/s 24b | Yes | No |
| Interest on Home Loan (Let out property) u/s 24b | Yes | Yes |
| Professional Tax | Yes | No |
| Gratuity exemption u/s 10(10) | Yes | Yes |
| Donation u/s80G | Yes | No |
Important tips that help you to decide which tax regime will be beneficial –
1. When total deductions are Rs 150000 or less – New Tax regime will be beneficial
2. When total deductions are more than Rs 375000 -Old Tax Regime will be beneficial
3. When total deductions between -150000 to 375000 – it will depand upon your income level.
Now lets take an example when total deductions are between Rs 250000 ( u/s 80 C +80D+others)
Plus standard deduction Rs 50000
| Gross Total Income Before deductions -Rs 250000+ 50000 (standard deduction) (in Rs) | Tax as per Old Regime (In Rs) | Tax as per New Regime (in Rs) | Difference | Which regime to opt |
| 500000 | 0 | 0 | 0 | Any |
| 600000 | 0 | 0 | 0 | Any |
| 700000 | 0 | 0 | 0 | Any |
| 750000 | 0 | 0 | 0 | Any |
| 800000 | 12500 | 30000 | -17500 | Old |
| 900000 | 32500 | 40000 | -7500 | Old |
| 1000000 | 52500 | 52500 | 0 | Any |
| 1300000 | 112500 | 100000 | 12500 | New |
After that new tax regime will be beneficial.
Conclusion: Navigating the choice between the new and old tax regimes requires careful consideration of various factors. While the new regime offers revised tax slab rates and reduced surcharges, the old regime retains familiar deductions. Understanding your financial profile and deductions is crucial in determining which regime aligns best with your tax-saving goals.
That’s all for today -Queries related to above mailed at mamta0581@gmail.com
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