Confused about which Tax Regime to choose?

Why do you have to opt for a Tax Regime?

• CBDT (via circular no 04/2023) made it COMPULSORY for Employers to seek information from their Employees on which regime they wish to opt for?
• The Employer shall deduct TDS accordingly.
• If You FAIL to choose between the New and Old Tax Regime, the Employer will take the New Tax Regime as DEFAULT and Subtract the TDS under it. This could mean a Higher TDS Outflow for you!!
• However, you will have the option to Change it at the time of Filing your ITR.

New vs Old Regime - How do they stack up?

Basic Exemption Limit

• Old Regime - 2.5 Lakh
• New Regime - 3 Lakh

Income Tax Rebate Limit

• Old Regime - 5 Lakh
• New Regime - 7 Lakh

Standard Deduction

• Old Regime - 50,000
• New Regime - 50,000

Income Tax Slab Rates

Old Regime

• 0-2.5 Lakhs - Nil
• 2.5-5 Lakhs - 5%
• 5-10 Lakhs - 20%
• Above 10 Lakhs - 30%

New Regime

• 0-3 Lakhs - Nil
• 3-6 Lakhs - 5%
• 6-9 Lakhs - 10%
• 9-12 Lakhs - 15%
• 12-15 Lakhs - 20%
• Above 15 Lakhs - 30%

Deductions and Exemptions Available

Old Regime

• Investments under Section 80C (PPF, ELSS, EPF, Life Insurance Premium, Home Loan Principal, etc).
• Home Loan Interest Payment 
• Health Insurance Premiums
• Expenses on medical treatment, training or rehabilitation of a disabled dependent
• Treatment of self or dependent for specified disease
• Contribution to NPS
• Interest paid on Education Loan
• Donation to specified institutions
• Disability of self
• House Rent Allowance
• Leave Travel Allowance
• Leave Encashment
• Mobile and Internet Reimbursement, Food Coupons or Vouchers, Uniform Allowance, etc.

New Regime

• Deduction towards Employer's Contribution to NPS
• Expenses towards earnings from Family Pension upto 15,000
• Standard deduction of up to 30 percent of the annual value of the let-out property, in case of rental income from property
• Exemption on Voluntary Retirement 10(10C), Gratuity u/s 10(10) and Leave Encashment u/s 10(10AA)
• Deduction for additional employee cost
• Amount paid or deposited in the Agniveer Corpus Fund
• Also, Interest and maturity proceeds from schemes such as Public Provident Fund (PPF) and Sukanya Samriddhi account and Life Insurance Policies remain Tax-Exempt under the New Regime.

Some Tips on How to Choose the Right Tax Regime for You

• If you have income upto Rs 7 lakh then the New Tax Regime is better
• If you have No Tax savings and Deductions to avail then consider going for the New Tax Regime
• If you have just 80C Deduction of Rs 1.5 lakh then New Tax Regime might be better
• If you can avail 80C Deduction and also have a Home Loan consider the Old Tax Regime
• If you have an HRA Deduction to claim, the Old Tax Regime might be better for you.

Now let's understand which Tax Regime will be More Beneficial for you depending on your Income Group

For Income = 8 Lakhs  

• If Deductions + Exemptions > 212,500 : Old Regime  - If Deductions + Exemptions < 212,500 : New Regime

For Income = 9 Lakhs  

• If Deductions + Exemptions > 262,500 : Old Regime  
• If Deductions + Exemptions < 262,500 : New Regime

For Income up to 10 Lakhs  

• If Deductions + Exemptions > 300,000 : Old Regime  
• If Deductions + Exemptions < 300,000 : New Regime

For Income = 11 Lakhs  

• If Deductions + Exemptions > 325,000 : Old Regime  
• If Deductions + Exemptions < 325,000 : New Regime

For Income = 12 Lakhs  

• If Deductions + Exemptions > 350,000 : Old Regime  
• If Deductions + Exemptions < 350,000 : New Regime

For Income = 13 Lakhs  

• If Deductions + Exemptions > 362,000 : Old Regime  
• If Deductions + Exemptions < 362,000 : New Regime

For Income = 14 Lakhs  

• If Deductions + Exemptions > 375,000 : Old Regime  
• If Deductions + Exemptions < 375,000 : New Regime

For Income = 15 Lakhs  

• If Deductions + Exemptions > 408,500 : Old Regime  
• If Deductions + Exemptions < 408,500 : New Regime

For Income of 15.5 lakhs - 5 Cr 

• If Deductions + Exemptions > 425,000 : Old Regime  
• If Deductions + Exemptions < 425,000 : New Regime