Difference between New vs Old Tax Regime comes down to your income and investments you make. If you don’t make any investments, then new tax regime is better for you due to low tax slab rates. And if you make investments and claim deductions on those investments than old tax regime is better for you to pay less income tax on your taxable income.
Let us understand New vs Old Tax Regime in detail.
New vs Old Tax Regime Video
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New vs Old Tax Regime: Which is Better
As seen in above video, old tax regime is better for you when you make multiple investments and claim deductions that can help you to save income tax. Even if your income is Rs. 11 Lakh in financial year, still you don’t have to pay any tax with old tax regime by effectively using all deduction options available, which is not possible with new tax regime.
Where as, if you do not make any investments, than new tax regime is better since the tax slab rates are reduced in new regime compared to old regime, and there are not many deductions available in new tax regime.
Tax rebate 87A limit for taxable income in old tax regime is Rs. 5 lakh and with new tax regime the limit is Rs. 7 lakh up to which no income tax need to be paid.
Use below Income Tax Calculator:
Old Tax Regime Slab Rates
Below are the income tax slab rates with old tax regime for age below 60 years:
| Income | Tax Slab Rates (Old Tax Regime) |
|---|---|
| Rs. 0 – Rs. 2.5 Lakh | 0% |
| Rs. 2.5 Lakh – Rs. 5 Lakh | 5% |
| Rs. 5 Lakh – Rs. 10 Lakh | 20% |
| Rs. 10 Lakh or above | 30% |
Tax rebate under Section 87A is applicable with old tax regime when your taxable income is below Rs. 5 lakh in financial year.
You can know more about Tax Slab Rates for Senior Citizens here.
Let us now see the reduced tax slab rates, that is New Tax Regime for age up to 60 years.
New Tax Regime Slab Rates
| Income | Tax Slab Rates (New Tax Regime) |
|---|---|
| Rs. 0 – Rs. 3 Lakh | 0% |
| Rs. 3 Lakh – Rs. 6 Lakh | 5% |
| Rs. 6 Lakh – Rs. 9 Lakh | 10% |
| Rs. 9 Lakh – Rs. 12 Lakh | 15% |
| Rs. 12 Lakh – Rs. 15 Lakh | 20% |
| Rs. 15 Lakh or above | 30% |
Note that the new tax regime slab rates are applicable to all age groups, unlike old tax regime.
Standard Deduction of Rs. 50,000 is available in both Old and new tax regime and Tax Rebate is also applicable with new tax regime if your taxable income is below Rs. 7 Lakh in financial year.
Benefits of Old Tax Regime
There are multiple benefits available in Old Tax Regime in FY 2023-24:
- Standard Deduction of Rs. 50,000 is available to salaried employees and pensioners, which means this flat deduction should be subtracted from your gross income for tax calculation purpose
- You get more deductions under Section 80C, Section 80D, Section 80CCD and many more deductions in this list
- No tax to be paid if your taxable income is below Rs. 5 Lakh in FY 2023-24 with the help of Tax rebate under Section 87A
- Also, you get the benefit of HRA (House Rent Allowance) if you stay in rented accommodation
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Benefits of New Tax Regime
New tax regime also provides you few benefits in terms of tax calculation:
- Standard Deduction of Rs. 50,000 is available to salaried employees and pensioners in new tax regime
- The tax slab rates in new regime are low compared to old tax regime, which reduces your income tax, provided that you have to forgo majority of the deductions available in old tax regime
- There are few deductions available in new tax regime, such as NPS contribution from employer, Home loan interest component under Section 24(b) if property is let out (rented) and few more new tax regime deduction options available here.
Conclusion
So to summarize, you should select new tax regime only when you will not make investments or claim deductions such as Insurance premiums, PPF (Public Provident Fund), Home Loan EMI payments, ELSS mutual funds, provident fund, etc. This will help you to pay less income tax due to reduced tax slab rates in new tax regime.
And if you are going to make multiple investments and claim deductions under various sections, than old tax regime will be better for you to pay less income tax and also save for your future by investing in multiple tax deductible schemes in India
Some more Reading:
- No Income Tax with Tax Rebate 87A
- SIP vs Lumpsum Investment
- ULIP – Unit Linked Insurance Plan Explained
Frequently Asked Questions
Is it better to choose new or old tax regime?
If you are not making any investments or claiming deductions than new tax regime is better for you, else go for old tax regime if you are going to make multiple investments that can help you to claim deductions. In this way you’ll save for your future and also pay less income tax.
What is the difference between old and new regime tax slab 2023-24?
New tax slab rates for FY 2023-24 are reduced tax slab rates compared to old tax regime. New regime helps you to pay less income tax due to this but you don’t have many options to claim deductions that can help you save more income tax. On the other hand, old tax regime allows you to claim multiple deductions and save income tax even thought the tax slab rates are high as mentioned above.
Is 80C not applicable in new tax regime?
No, Section 80C is not applicable in new tax regime. It is only applicable for old tax regime.
Which tax regime is better for 12 lakhs?
If you do not claim any deductions under various sections than new tax regime is better considering Rs. 50,000 standard deduction, you pay Rs. 85,800 tax with new regime. But if you claim deductions of up to 6 lakh with old tax regime using various tax saving options, you pay Rs. 33,800 tax with old tax regime. So it depends on how much investments you can claim with 12 lakh income to choose between old and new tax regime.
Can I switch between tax regimes?
Yes you can switch between old and new tax regime and vice versa while filing ITR (Income Tax Return).
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Income Tax Calculator App – FinCalC
For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.
What you can do with this mobile App?
- Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
- Enter estimated Investments to check income tax with Old and New Tax Regime
- Save income tax details and track regularly
- Know how much to invest more to save income tax
- More calculators including PPF, SIP returns, Savings account interest and lot more
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