New v/s. Old tax scheme under IT act

prerna | Last updated: 13 May 2021

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This article compares the new and old tax schemes under the Income Tax Act. It details the different tax slabs for individuals below 60 and between 60-80 years of age under both schemes. Crucially, it highlights the significant differences in available deductions, with the old scheme allowing for numerous Chapter VI-A deductions and salary-related allowances, which are largely unavailable under the new scheme.

New vs Old Tax Scheme: Which is Better for You

Particular	New Tax Scheme	Old Tax Scheme
Tax Slab for individuals below 60 years of age	Taxable Income upto: • 0 - 2.5 lacs – 0% • 2.5 lacs to 5 lacs - 5% on 2.5 lacs i.e. upto 12,500/- • 5 lacs to 7.5 lacs - 10% on 2.5 lacs + 12,500/- • 7.5 lacs to 10 lacs - 15% on 2.5 lacs + 37,500/- • 10 lacs to 12.5 lacs - 20% on 2.5 lacs + 75,000/- • 12.5 lacs to 15 lacs - 25% on 2.5 lacs + 125,000/- • 15 lacs above - 30% above 15 lacs + 187,500/-	Taxable Income upto: • 0 - 2.5 lacs - 0% • 2.5 lacs to 5 lacs - 5% on 2.5 lacs i.e. upto 12,500/- • 5 lacs to 10 lacs - 20% on 5lacs + 12,500/- • 10 lacs and above - 30% on 10 lacs above + 112,500/-
Cess	Health and education cess @ 4% will be added on and above tax as computed above.	Health and education cess @4% will be added on and above tax as computed above.
Deduction under Chapter VI-A of Income Tax Act.	Following deductions will not be allowed i.e. will not be deducted from Income to arrive at final taxable income: • 80C (Rs. 1.5 lacs) - LIC, tuition fees, Principal on housing loan, stamp duty on residential house property etc. • 80CCC - Contribution to other pension funds • 80CCD - Contribution to Central Govt. Pension scheme (employee contribution only, employer contribution allowed as exemption) • 80D - Mediclaim for self and parents • 80DD – Expenditure for dependent disability • 80DDB - Medical Treatment for specified diseases • 80E - Interest on education loan for higher studies • 80EEA - Interest on housing loan, where stamp duty value of house property is upto 45 lacs • 80EEB - Interest on loan for purchase of electric vehicle • 80G - Donation to specified funds, charitable institutions • 80GG – Deduction for rent paid • 80GGA - Donation for scientific research or rural development • 80GGC - Contribution to political parties	All deductions under chapter VI-A as listed in “New tax Scheme” will be allowed to be deducted from income to arrive at taxable income.
Deduction from salary	Deductions from salary on below not allowed: • Interest on self-occupied property (upto Rs. 2 lacs) • Standard Deduction of Rs. 50,000/- • House rent allowance (HRA) • Leave Travel Concession (LTC/LTA) • Children Education Allowance (Rs. 200/- p.m. per child upto 2 children) • Profession Tax (Rs. 2,500)	All deductions from salary as listed in “New tax Scheme” will be allowed to be deducted from salary to arrive at taxable salary in the hand of assessee.
Rebate u/s. 87A	If taxable income (i.e income with no deductions and exemptions as above) does not exceeds Rs. 5 lacs, than rebate shall be amount equal to tax payable or Rs. 12,500/- whichever is less.	If taxable income (i.e. income (minus) deductions and exemptions as above) does not exceeds Rs. 5 lacs, than rebate shall be amount equal to tax payable or Rs. 12,500/- whichever is less.
Tax Slab for individuals between 60 to 80 years of age	Taxable Income upto: • 0 - 3 lacs - 0% • 3 lacs to 5 lacs - 5% on 2 lacs i.e. upto 10,000/- • 5 lacs to 7.5 lacs - 10% on 2.5 lacs + 10,000/- • 7.5 lacs to 10 lacs - 15% on 2.5 lacs + 35,000/- • 10 lacs to 12.5 lacs - 20% on 2.5 lacs + 72,500/- • 12.5 lacs to 15 lacs - 25% on 2.5 lacs + 122,500/- • 15 lacs above - 30% above 15 lacs + 185,000/-	Taxable Income upto: • 0 - 3 lacs - 0% • 3 lacs to 5 lacs - 5% on 2 lacs i.e. upto 10,000/- • 5 lacs to 10 lacs - 20% on 5 lacs + 10,000/- • 10 lacs and above - 30% on 10 lacs above + 110,000/-

FAQ :

The primary difference lies in the availability of deductions. The old tax scheme allows for numerous deductions under Chapter VI-A and from salary (like HRA, LTC, standard deduction), whereas the new tax scheme significantly restricts or disallows most of these deductions.

Yes, both the new and old tax schemes have different tax slabs for individuals below 60 years of age and those between 60 and 80 years of age.

Under the new tax scheme, deductions like those under Chapter VI-A (e.g., 80C, 80D, 80E) and salary-related deductions (e.g., standard deduction, HRA, LTC) are typically not allowed.

Yes, a health and education cess of 4% is added on top of the computed tax in both the new and old tax schemes.

Yes, both the new and old tax schemes offer a rebate under Section 87A if the taxable income does not exceed Rs. 5 lacs, with the rebate being the lesser of the tax payable or Rs. 12,500/-.

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Hi, I am chartered accountant and having an experience in the field of Finance , Taxation , Accounts Audit. From the last 5 years i am employed of real estate industry and now i have started my own practice by the name prerna saboo co. Thanks Prerna email i.d. :- prernasaboo7 @ gmail.com Phone no :- 85 ... Read more

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