Confused on Choosing New or Old Tax Regime? Lets Evaluate
How should I decide that which Income Tax regime is better for me? What Deductions are available in New Tax Regime and what deductions are available in Old Tax Regime? Which regime should I choose for maximum Tax Benefit? All questions are answered in this Article.
Budget 2023 has made the New Tax Regime very lucrative to encourage Taxpayers to opt for new tax regime.
Some of the Features of New Tax Regime are:
Default Regime:
The New Tax Regime is now the default regime for taxpayers. Unless you opt-out and go for the Old Tax Regime, your employer will deduct your TDS as per the New Tax Regime.
Tax Rates are per New Tax Regime:
The New Tax Regime provides Tax Exemption up to Rs. 3 lakh, and the highest Tax Rate of 30% is applicable once the Income crosses Rs. 15 Lakhs. Below given Table gives a comparative analysis.
Hike in Rebate:
The new Tax Regime has hiked the rebate up to Rs. 25000. Which means that up to an Income of Rs. 7 Lakhs, the Taxpayer is not required to pay any Income Tax.
Surcharge reduced for High-Income Individuals (HNIs):
Surcharge rate under New Tax Regime for HNIs, having annual incomes exceeding Rs. 5 crores, reduced from 37% to 25%, so their effective tax rate will reduce from 42.74% to 39%.
Standard Deduction:
Standard Deduction of Rs. 50,000 for Salaried Individuals which was previously available for Old Tax Regime is now available for the New Tax Regime as well. So effectively Saraly of up to Rs. 7.5 Lahks is now Tax-free.
These are applicable for FY 2024-25 (AY 2025-26) as well, as no change has been announced in the Interim Finance Act 2024.
How to Choose between the New and Old Tax Regime?
Income Tax Deductions available with the Taxpayer are the deciding Factor in choosing if he should Choose the New or Old Tax Regime.
As per the calculations done by us, If your Income is more than Rs. 15 Lakhs and up to Rs. 50 Lakhs the Old Tax Regime is beneficial for you only if your available deductions are greater than Rs. 3,75,000 in a year. Below given table give cut-off Rate for other Income Levels:
Break Even Point for New and Old Tax Regime
Table 1
Table 2
