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The assesse can choose between the New Tax Regime and the Old Tax Regime depending on what is best suitable from a tax planning point of view.
Income-tax rates under the new tax regime v/s the old tax regime
| Income slabs (Rs) | Tax Rate(Old Regime) | Tax Rate(New Regime – devoid of exemptions & deductions) |
|---|---|---|
| Up to 2.5 lakh | Nil | Nil |
| 2.5-5 lakh | 5% | 5% |
| 5-7.5 lakh | 20% | 10% |
| 7.5-10 lakh | 20% | 15% |
| 10-12.5 lakh | 30% | 20% |
| 12.5-15 lakh | 30% | 25% |
| Above 15 lakh | 30% | 30% |
Note: The above rates are subject to surcharge and cess, as applicable.
Which scheme is better ( New vs. Old )
New Tax Regime has proposed lower income-tax rates, for income segments up to Rs 15 lakh. But the proposed lower tax rates will be applicable only if we are willing to give up exemptions and deductions available.
This means that when we choose the New Tax Regime, we will have to forgo some exemptions such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), etc] and deductions available under chapter VI A of the Act that grant
Only the deduction under Section 80CCD(2) [i.e., employer’s contribution on account of an employee in a notified pension scheme] and Section 80JJAA [i.e. for new employment] can be claimed.
Even the Standard Deduction under Section 16 [which is currently Rs 50,000] available to salaried individuals and the deduction on home loan interest, under Section 24(b) will be disallowed. Around 70 exemptions and deductions have been removed in the New Tax Regime.
Old regime better option for high-income earners
| Particulars | Old Tax Regime (Rs) | New Tax Regime (Rs) |
|---|---|---|
| Gross Income | 1,000,000 | 1,000,000 |
| Deductions: | ||
| U/Sec: 80C | 150,000 | – |
| U/Sec: 80D | 25,000 | – |
| U/Sec: 24(b) | 75,000 | – |
| Taxable Income | 750,000 | 1,000,000 |
| Tax Slab (OLD) | ||
| 0 to 2.5 Lakh | – | – |
| 2.5 to 5 Lakh @ 5% | 12,500 | – |
| 5 Lakh to 10 Lakh @ 20% | 50,000 | – |
| > 10 Lakh @ 30% | – | – |
| Tax Slab (NEW) | ||
| 0 to 5 Lakh | – | – |
| 2.5 to 5 Lakh @ 5% | – | 12,500 |
| 5 to 7.5 Lakh @ 10% | – | 25,000 |
| 7.5 Lakh to 10 Lakh @ 15% | – | 37,500 |
| 10 Lakh to 12.5 Lakh @ 20% | – | – |
| 12.5 Lakh to 15 Lakh @ 25% | – | – |
| > 15 Lakh @ 30% | – | – |
| Income Tax | 62,500 | 75,000 |
| Cess @ 4% | 2,500 | 3,000 |
| Total Tax Outgo | 65,000 | 78,000 |
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