This is the most asked question when it comes to taxation. In the Budget 2023, Finance Minister Nirmala Sitharaman announced few changes in the New Tax regime.
Three major changes in the new tax regime, which impact most of the salaried class are under,
- Basic exemption limit is increased up to Rs. 3 Lacs (which was earlier Rs. 2.5 Lakhs)
- In case of salary, Standard Deduction of Rs. 50,000/- is applicable (earlier it was only for old tax regime)
- Rebate amount is increased in the new tax regime in such a way that if your taxable income is below Rs. 7 lakhs, you do not have to pay any income tax.
Now let’s see the tax rates
|Old Tax Regime||New Tax Regime|
|Income||Tax Rate||Income||Tax Rate|
|Up to Rs. 2.5 Lakhs||0%||Up to Rs. 3 Lakhs||0%|
|Between Rs. 2.5 Lakhs to Rs. 5 Lakhs||5%||Between Rs. 3 Lakhs to Rs. 6 Lakhs||5%|
|Between Rs. 5 Lakhs to Rs. 10 Lakhs||20%||Between Rs. 6 Lakhs to Rs. 9 Lakhs||10%|
|Above Rs. 10 Lakhs||30%||Between Rs. 9 Lakhs to Rs. 12 Lakhs||15%|
|–||–||Between Rs. 12 Lakhs to Rs. 15 Lakhs||20%|
|–||–||Above Rs. 15 Lakhs||30%|
Note for Old Tax Regime:
If your taxable income is up to Rs. 5 Lakhs, considering the rebate amount, you do not have to pay any tax. The tax slab between Rs. 2.5 Lakhs to Rs. 5 Lakhs @5% is applicable if your taxable income is above Rs. 5 Lakhs.
Note for New Tax Regime:
If your taxable income is up to Rs. 7 Lakhs, considering the rebate amount, you do not have to pay any tax. The tax slab between Rs. 6 Lakhs to Rs. 9 Lakhs @10% is applicable if your taxable income is above Rs. 7 Lakhs.
Caution – Do not jump to conclusion just by tax rates. Please note that there are many deductions available for the old tax regime.
Few most popular deductions under old tax regime are as under,
|80 C||Rs. 1.50 Lakhs|
|NPS||Rs. 0.50 Lakhs|
|80 D (Insurance – Self)||Maximum up to Rs. 0.25 Lakhs|
|80 D (Insurance – People above age 60)||Maximum up to Rs. 0.50 Lakhs|
Apart from above, if you have availed Housing loan, interest paid on housing loan can be claimed as deduction (maximum deduction of Rs. 2 Lakhs).
You can also claim deduction for the HRA (House Rent Allowance) component of your salary with some limits.
Above-mentioned deductions are not available in the new tax regime.
Instead of calculating tax for different income levels, below is the summary of which tax regime you should choose.
|Annual Taxable Salary Income||Total tax saving deductions (excl. Standard Deduction of Rs. 50,000/-)||Which regime to choose?|
|Up to Rs. 7 Lakhs||–||New|
Rs. 8 Lakhs
|If deductions > Rs 1,38,500/-||Old|
|If deductions < Rs 1,38,500/-||New|
Rs. 9 Lakhs
|If deductions > Rs 2,12,500/-||Old|
|If deductions < Rs 2,12,500/-||New|
Rs. 10 Lakhs
|If deductions > Rs. 2,50,000/-||Old|
|If deductions < Rs 2,50,000/-||New|
Rs. 11.5 Lakhs
|If deductions > Rs. 2,87,500/-||Old|
|If deductions < Rs 2,87,500/-||New|
Rs. 12.5 Lakhs
|If deductions > Rs. 3,12,500/-||Old|
|If deductions < Rs 3,12,500/-||New|
Rs. 14 Lakhs
|If deductions > Rs. 3,25,000/-||Old|
|If deductions < Rs 3,25,000/-||New|
Rs. 15 Lakhs
|If deductions > Rs. 3,58,000/-||Old|
|If deductions < Rs 3,58,000/-||New|
Rs. 16 Lakhs
|If deductions > Rs. 3,75,000/-||Old|
|If deductions < Rs 3,75,000/-||New|
Now you need not worry. We have tried to make it super for you to decide which tax regime to select.
There are few rules that are listed below,
- If your total deductions are less than Rs. 1.5 Lakhs then, New regime will be beneficial for you
- If your total deductions are more than Rs. 3.75 Lakhs, Old regime will be beneficial
- If your total deductions are between Rs. 1.5 Lakhs to Rs. 3.75 lakhs, then beneficial regime will depend on your income level
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