Time to give Declaration: New Vs Old Income Tax Regime, Which One is Better for Salaried Employees?
The New Tax Regime was introduced in Budget 2020 by Finance Minister Nirmala Sitharman, which was effective from AY 2021-22. But this newly introduced regime was not rewarding at that time.
From AY 2024-25, the revamping of the New Tax Regime in income tax started, where the finance minister introduced and accommodated several benefits in the said regime, like standard deduction, NPS deduction (employer share), etc. as well.
In the upcoming Budget 2025, it is expected that the new tax regime will become more lucrative or beneficial for taxpayers.
The benefits introduced in the new tax regime by the Finance Act 2024 are as follows:
1. Standard Deduction: It has been increased to Rs. 75000 in the New Tax Regime. Whereas, it’s still the same as Rs. 50,000 in the Old Tax Regime.
2. NPS Deduction: NPS u/s 80CCD (2) Employer Share Deduction increased to 14% of Basic and DA for Non-Government Employees. The deduction percentage is still the same at 10% in the Old Tax Regime.
Tax Slab Rates in New Tax Regime for FY 2024-25
Tax Slab Rates in Old Tax Regime for FY 2024-25
Which Regime is Better for Choosing: Old or New Tax Regime?
On the basis of available deductions of income tax, we have made a brief analysis to decide which Tax Regime is better for you to opt for. Here in the below table, we have compared both the tax regimes, which are beneficial for salaries of individuals up to Rs.50,00,000.
In the above table, we take the example of income up to Rs.50,00,000 and as you can see, if you only have Section 80C deductions, the Old Tax Regime would no longer be beneficial for you. If you want to have more benefit from the old tax regime, now you need more deductions like HRA and home loans, etc., in your kitty.
But if we talked about the salaried individuals with incomes up to Rs.7,75,000, the introduced New Tax Regime is always beneficial.
Achieving Break-Even Point
In case of having deductions of more than 433,333, then the Old Tax Regime is always beneficial for you.
