New Income Tax Regime Vs Old Income Tax Regime: 8 Things to consider before Choosing One

As the new financial year began on April 1, it is critical for salaried individuals to choose between the new and old tax regimes. There are only three days remaining, so make your decision quickly because it will have a direct impact on your take-home pay.

Your company will withdraw income from your compensation based on your choice of. Making the wrong option might have a huge impact on your take-home pay. If you’re having trouble deciding between the two, these pointers can help you make the right decision at the last minute.

Key Things to Consider:

1.  If your income is up to Rs.7 lakh, the new tax regime is preferable because there is no tax up to Rs. 7 lakh and there is also a standard deduction of Rs. 50,000 in the new tax regime. This means a salaried person can go with Tax-Free Income of up to 7.5 Lakhs. According to the amendments suggested in the Budget, no tax will be paid on persons earning up to Rs. 7 lahks per year under the new tax regime, but it made no adjustments for those who continue to benefit from tax exemptions and deductions on investments and costs such as HRA.

2. If you don’t have any deductions, consider switching to the new tax regime, which has lower tax rates and no deduction for investments.

3. Under the new regime, taxpayers must forego benefits such as Leave Travel Allowance, House Rent Allowance, Tuition Fee, and interest on housing loans, among others.

4. New Income Tax Slabs

No tax would be levied for income up to Rs.3 lakh.

Income between Rs.3-6 lakh would be taxed at 5 per cent.

Income between Rs.6-9 lakh would be taxed at 10 per cent.

Income between Rs.9-12 lakh at 15 per cent.

Income between Rs.12-15 lakh at 20 per cent.

Income of Rs.15 lakh and above will be taxed at 30 per cent.

5. Old Tax Slabs

Income up to Rs.2.5 is exempt from taxation under old tax regime.

Income between Rs.2.5 to Rs.5 lakh is taxed at the rate of 5 per cent under the old tax regime.

Income between Rs. 5 lakh to Rs.10 lakh is taxed at a rate of 20 per cent in the old regime

Under the old regime, personal income above Rs.10 lakh is taxed at a rate of 30 per cent.

6. New Vs Old Tax Regime

Finance Minister Nirmala Sitharaman stated at the presentation of the Union Budget 2023 on 1 February that an individual with an annual salary of Rs.9 lakh will be required to pay only Rs.45,000. This is merely 5% of his or her salary. It is a 25% reduction from what he or she would have had to pay under the previous regime.

An individual earning Rs.15 lakh would be obliged to pay only Rs.1.5 lakh, or 10% of his or her income, a 20% drop from the current burden of Rs.1,87,500, according to Sitharaman.

7. Under the previous regime, an NPS deduction of Rs.50,000 was available.

8. The Income Tax Department has made available a tax calculator. Simply enter the necessary information, and the calculator will calculate which choice is best for you. Link to calculator