Tax Effects

Deductions and Exemptions allowed under New Tax Regime

Old Tax Regime Vs. New Tax Regime: Which one is Better? 🤔

To know which one is better, we have to understand both the Regimes and its important features which are as follows:


🔵 Important Features of Old Tax Regime:


1. It is Optional Tax Regime.

2. It is available for Individual, HUF, AOP/BOI, AJP.

3. For Individuals: Three types of Slabs available viz.

- For Normal Person - Exempt upto Rs. 2.5 Lacs
- For Senior Citizen (Age 60 or more) - Exempt upto Rs. 3 Lacs
- For Super Senior Citizen (Age 80 or more) - Exempt upto Rs. 5 Lacs


4. Normal Slab Rate under Old Tax Regime are as follows:

From Rs. 0 to Rs. 2.5 Lacs = Nil
> Rs. 2.5 Lacs to Rs. 5 Lacs = 5%
> Rs. 5 Lacs to Rs. 10 Lacs = 20%
Above Rs. 10 Lacs = 30%

5. Rebate allowed u/s 87A upto Rs. 12,500/- if Total Income is upto Rs. 5 Lacs.

6. Maximum Surcharge Rate under Old Regime is 37%

7. All Deductions and Exemptions are allowed to be claimed under Old Tax Regime. For Example: HRA, LTA, Home Loan interest, 80C, 80D, etc. can be claimed here.



🔵 Important Features of New Tax Regime:


1. This is the Default Tax Regime.

2. It is available for Individuals, HUF, AOP, BOI, AJP.

3. Only 1 Slab Rate is available and there is no specific rate/criteria for Senior Citizen or Super Senior Citizen.

4. Slab Rate under New Tax Regime are as follows:

From Rs. 0 to Rs. 3 Lacs = Nil
> Rs. 3 Lacs to Rs. 6 Lacs = 5%
> Rs. 6 Lacs to Rs. 9 Lacs = 10%
> Rs. 9 Lacs to Rs. 12 Lacs = 15%
> Rs. 12 Lacs to Rs. 15 Lacs = 20%
Above Rs. 15 Lacs = 30%


5. Rebate u/s 87A is allowed under New Regime if total income is upto Rs. 7 Lacs. [If income is more than Rs. 7 Lacs, then Marginal relief is also available]

6. Maximum Surcharge Rate under New Tax Regime is 25%

7. No Deductions [except 80JJAA and 80CCD(2)] is allowed. HRA, LTA, Home Loan Interest (inter head) set off benefit also not available.


🔵 FINAL CRUX : WHICH ONE TO CHOOSE?

To simply put it, if you are having Home Loan, paying rent, or you have invested into multiple sections viz. 80C, 80D, 80E, etc., then Old Tax Regime Might be beneficial for you.

On the contrary, if you are not having any home loan, not paying any rent, or you dont want to invest into various sections, then New Tax Regime might be beneficial.

[Please note: Apart from the above, there might be some other factors, like your total income, your investment goals, or your losses (if any) from business or other head, etc, need to be checked before making any final decision.]

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