Old vs New Tax regime
With the initiation of a new tax regime, comes the confusion of which one is suitable for you. Which should you choose – old vs new tax regime ?
Here another question arises, what is your income source? Are you a salaried individual, running your business or an entrepreneur or professional?
Old Tax Regime
Under the old structure of taxation, the assesse can claim the deduction, exemptions, and allowances with which they can have proper tax planning and save taxes.
The government has provided Indian taxpayers approximately 70 exemptions and deduction choices through the addition of sections to the Income Tax Act throughout the years, allowing them to reduce their taxable income and hence pay less tax.
Some exemptions are included in your income, such as the House Rent Allowance (HRA) and Leave Travel Allowance (LTA). The deductions allow you to lower your tax obligation by investing, saving, or spending on specific items. Section 80C is the most popular and generous deduction, allowing you to reduce your taxable income by up to Rs.1.5 lakh. Besides that, there are several more exemptions and deductions most widely available for the taxpayers.
New Tax Regime
Let’s start with the new tax regime. It has six tax slabs, each having a lower rate on income up to Rs. 15 lakhs. Multiple exemptions and deductions are not available due to the varying income slabs and tax rates.
Old vs New Tax Regime Tax Slab
|Income tax slab Old regime||Annual Income||New Regime|
|Nil||Up to Rs.2.5 lakhs||Nil|
|5%||Rs.2.5 – 5 lakh||5%|
|20%||Rs.5 – 7.5 lakh||10%|
|Rs. 7.5 – 10 lakh||15%|
|30%||Rs. 10-12.5 lakh||20%|
|Rs. 12.5-15 lakh||25%|
|Rs. 15 and above||30%|
Which is better ?
If your annual income is on the higher side, the old tax regime is a better option than the new one. Both the new and old income tax slabs have advantages and disadvantages. Due to the variety of deductions and exemptions available under the former tax regime, such as PPF, ELSS, and Mediclaim, the taxpayer had a lot of investment choices.
The new tax regime is tailored to new investors and individuals who have only recently begun their careers, as their income has only recently begun.
As a result, the only way to determine the old vs new tax regime- which is better for you is to enter your income into both regimes to determine the actual tax payable.
But, according to me, one should opt for old tax regime and take maximum benefit of exemptions and deductions and save more tax.
To know which tax regime will help you pay less tax, connect with us at 9460825477