The Government of India made new tax regime as the default tax regime from FY 2023-24. After that, there are various confusions between taxpayers on which scheme is beneficial. So here is a quick glimpse between new and old tax regimes that you need to know before the end of this F.Y.
Page Contents
1. Slab Rates
New Tax Regime (from FY 2023-24) (Default)–
| SR. NO. | SLABS OF TOTAL INCOME (after deductions, exemptions, etc.) | TAX RATE |
| 1. | Upto Rs. 3 Lakhs | NIL |
| 2. | Rs. 3 Lakhs to Rs. 6 Lakhs | 5% |
| 3. | Rs. 6 Lakhs to Rs. 9 Lakhs | 10% |
| 4. | Rs. 9 Lakhs to Rs. 12 Lakhs | 15% |
| 5. | Rs. 12 Lakhs to Rs. 15 Lakhs | 20% |
| 6. | Above Rs. 15 Lakhs | 30% |
Old Tax Regime –
| SR. NO. | SLABS OF TOTAL INCOME (after deductions, exemptions, etc.) | TAX RATE |
| 1. | Upto Rs. 2.5 Lakhs | NIL |
| 2. | Rs. 2.5 Lakhs to Rs. 5 Lakhs | 5% |
| 3. | Rs. 5 Lakhs to Rs. 10 Lakhs | 20% |
| 4. | Above Rs. 10 Lakhs | 30% |
However, there will be additional Health and Education Cess (HEC) and Surcharge will be levied on the above tax rates.
The new tax regime provides different tax rates ranging from 5% to 30%. Where the person falls in 30% tax bracket category when his total income is more than Rs. 15 Lakhs.
However, in old tax regime the person falls in 30% tax bracket when his total income is more than Rs. 10 Lakhs.
2. Zero Tax Liability Upto –
| SR. NO. | PARTICULARS | NEW TAX REGIME (from FY 2023-24) | OLD TAX REGIME |
| 1. | Total Income | 7,00,000 | 5,00,000 |
| 2. | Tax Liability | 25,000 | 12,500 |
| 3. | Less: Rebate u/s 87A | (25,000) | (12,500) |
| 4. | Tax Liability | Nil | Nil |
In new tax regime, there is nil tax liability till Rs. 7 lakhs as compared to Rs. 5 Lakhs in old tax regime but this is not the only factor we should take into consideration while choosing an option. There are some deductions and exemptions which are not available in new scheme (see point no. 4).
The fact to note here is that after Rs. 7 lakhs there will be a tax liability of Minimum Rs. 25,000/- + 4% HEC.
3. To Whom the New Tax Regime Is Applicable?
Till FY 2022-23 new tax regime is available to only Individuals and HUF.
From FY 2023-24 it is a default tax regime for an Individual/HUF/AOP/BOI and artificial juridical person.
4. Comparison of Lists of Deductions and Exemptions
| SR. NO. | PARTICULARS | NEW TAX REGIME (from FY 2023-24) | OLD TAX REGIME |
| 1. | Leave Travel Allowance u/s 10(5) | No | Yes |
| 2. | House Rent Allowance u/s 10(13A) | No | Yes |
| 3. | Travelling Allowance, Transfer Allowance, Conveyance Allowance for official purpose. | Yes | Yes |
| 3. | Standard Deduction of Rs. 50,000 | Yes | Yes |
| 4. | Professional Tax Deduction | No | Yes |
| 5. | Interest on housing loan – self occupied property | No | Yes |
| 6. | Interest on housing loan – let out property | Yes | Yes |
| 7. | Deduction on family pension (maximum upto Rs. 15,000) | Yes | Yes |
| 8. | Deduction u/s 80C (PF, LIC, FD, Tuition Fees, Sukanya Samridhi Scheme, etc.) | No | Yes |
| 9. | Own Contribution to NPS u/s 80CCD | No | Yes |
| 10. | Employer’s Contribution to NPS u/s 80CCD(2) | Yes | Yes |
| 11. | Interest on Educational Loan u/s 80E | No | Yes |
| 12. | Donations u/s 80G | No | Yes |
| 13. | Disability deduction u/s 80U | No | Yes |
| 14. | Deduction to Employer u/s 80JJAA | Yes | Yes |
| 15. | Deduction u/s 80LA(1A) | Yes | Yes |
| 16. | Any other Deduction u/s 80 (other than above) | No | Yes |
| 17. | Exemption of Gratuity u/s 10(10) | Yes | Yes |
| 18. | Exemption of leave encashment u/s 10(10AA) | Yes | Yes |
| 19. | Exemption on voluntary retirement or separation u/s 10(10C) | Yes | Yes |
| 20. | Exemption on receipt of LIC u/s 10(10D) | Yes | Yes |
| 21. | Exemption of Interest received on PPF or Sukanya Samridhi Account | Yes | Yes |
| Following are specifically for Person having income from Business or Profession | |||
| 22. | Deduction for SEZ u/s 10AA | No | Yes |
| 23. | Additional Depreciation | No | Yes |
| 24. | Investment Allowance u/s 32AD | No | Yes |
| 25. | Deduction for Scientific Research u/s 35(1)(ii)/(iia)/(iii) or 35(2AA) | No | Yes |
| 26. | Capital expenditure u/s 35AD | No | Yes |
5. Option Available to Avail Old Tax Regime
New tax regime will be the default tax regime for everyone from F.Y. 2023-24. However, the old tax regime is also available for taxpayers. The option to avail old tax regime will be classified as below –
i. Taxpayer not having income from business or profession –
The taxpayer can opt for the option to tax under old tax regime at the time of filing of return u/s 139(1) (i.e. before the due date of filing the return of income) every year.
The option to tax under old tax regime needs to be selected in ITR and needs to be filed before the due date of the return. You cannot select the option in belated return or revised return.
Example –
-
- For FY 2023-24 Mr. A filed his ITR on 30/07/2024 i.e. before the due date (in non-audit case) and selected the option to tax under old scheme. But if he filed his return of income on 14/08/2024 then he cannot exercise the option to tax under old tax regime.
- Now, for FY 2024-25 Mr. A again has to select between new tax regime and old tax regime at the time of filing the return of income.
For every year there is an option available to taxpayer to choose between new and old tax regimes in case of non-business or profession income.
ii. Taxpayer having income from business or profession –
The taxpayer can opt for the option to tax under old scheme before the due date of filing of return u/s 139(1) i.e. before the due date of filing the return of income.
The option once exercised shall apply to all subsequent years. However, the option can be withdrawn only once (i.e. not to be taxed as per old tax regime) but then you cannot exercise it again in any subsequent years.
Examples –
-
- For FY 2023-24 Mr. A (having business income) has exercised an option to tax as per old tax regime before the due date of filing the return of income.
- Now From FY 2024-25 Mr. A (having business income) will be taxed under old tax regime but he can opt out only once from old tax regime.
- Suppose for FY 2025-26 Mr. A (having business income) decides to opt-out from old tax regime and opt in for new tax regime. Then he will never have an option to opt for an old tax regime and will be taxed under new tax regime only.
- For FY 2026-27 and subsequent years Mr. A (having business income) will be taxed under new tax regime only.
- Suppose in FY 2027-28 Mr. A ceases to have income from business/profession then he will again have an option to choose between new and old tax regime.
6. Which Tax Regime Is Better for You? With Examples
Example 1
| SR. NO. | PARTICULARS | NEW TAX REGIME (from FY 2023-24) | OLD TAX REGIME |
| 1. | Income From Salary | 7,50,000 | 7,50,000 |
| 2. | Less: Standard Deduction | (50,000) | (50,000) |
| 3. | Less: Deduction u/s 80C (PF) | – | (50,000) |
| 4. | Total Income | 7,00,000 | 6,50,000 |
| 5. | Tax on Total Income | 25,000 | 42,500 |
| 6. | Less: Rebate u/s 87A | (25,000) | – |
| 7. | Add: Health & Education Cess @ 4% | – | 1,700 |
| 8. | Total Tax | Nil | 44,200 |
Example 2
| SR. NO. | PARTICULARS | NEW TAX REGIME (from FY 2023-24) | OLD TAX REGIME |
| 1. | Income From Salary | 25,00,000 | 25,00,000 |
| 2. | Less: HRA u/s 10(13A) | – | (1,00,000) |
| 3. | Less: LTA u/s 10(5) | – | (20,000) |
| 4. | Less: Standard Deduction | (50,000) | (50,000) |
| 5. | Less: Deduction u/s 80C (PF) | – | (1,50,000) |
| 6. | Total Income | 24,50,000 | 21,80,000 |
| 7. | Tax on Total Income | 4,35,000 | 4,66,500 |
| 8. | Add: Health & Education Cess @ 4% | 17,400 | 18,660 |
| 9. | Total Tax | 4,52,400 | 4,85,160 |
Example 3
| SR. NO. | PARTICULARS | NEW TAX REGIME (from FY 2023-24) | OLD TAX REGIME |
| 1. | Income From Salary | 50,00,000 | 50,00,000 |
| 2. | Less: Standard Deduction | (50,000) | (50,000) |
| 3. | Less: Interest on housing loan – self occupied property | – | (2,00,000) |
| 4. | Less: Deduction u/s 80C (PF) | – | (1,50,000) |
| Employer’s Contribution to NPS u/s 80CCD(2) | (50,000) | (50,000) | |
| 5. | Less: Deduction u/s 80D | – | (25,000) |
| 6. | Less: Donation u/s 80G | – | (25,000) |
| 7. | Total Income | 49,00,000 | 45,00,000 |
| 8. | Tax on Total Income | 11,70,000 | 11,62,500 |
| 9. | Add: Health & Education Cess @ 4% | 46,800 | 46,500 |
| 10. | Total Tax | 12,16,800 | 12,09,000 |
There is no such scheme that will always be beneficial for taxpayers. Every time we have to check the facts and circumstances of the case.
Conclusion: Navigating between the old and new tax regimes requires careful consideration of individual circumstances. With a thorough understanding of the variations in tax rates, exemptions, and deductions, taxpayers can make informed choices to optimize their financial outcomes.
Author Bio
