Narendra Modi government has taken a big step in trying to promote the new tax regime. While presenting the budget for the financial year 2024-25 on Tuesday, Finance Minister Nirmala Sitharaman announced that under the New Tax Regime, the limit of standard deduction in income tax is being increased. Where earlier the standard deduction under the New Tax Regime was Rs 50,000, it has now been increased to Rs 75,000. That means if your salary is Rs 7,75,000 then you will not have to pay even a single rupee tax.
At the same time, tax exemption has not been increased in the old tax regime. The income tax rate in the New Tax Regime is comparatively lower, despite this the Old Tax Regime is still attracting many people. The reason for this is that in the new tax regime, you get only Rs 75,000 exemption, whereas in the old tax regime, you can claim more exemptions and deductions on income tax, due to which the tax on your income gets reduced.
First of all, let us know how much tax you will have to pay on how much income you earn under the new tax regime.
income tax slab income tax rate
3,00,000 0
3,00,001 -7,00,000 5%
7,00,001- 10,00,000 10%
10,00,001-12,00,000 15%
12,00,001-15,00,000 20%
15,00,001 and above 30%
new tax regime
The new tax regime is applicable from 1 April 2020 and at that time it was optional. But from April 1, 2023, it has been made the default tax regime. This means that the tax liability of any person will be calculated under the new tax regime only unless he voluntarily opts for the old tax regime.
While in the old tax regime you could avail various tax deductions and exemptions, in the new tax regime you get a tax exemption of Rs 75,000 by default. That means, if your salary is Rs 7,75,000 and you have taken the New Tax Regime, then you will not have to pay even Rs 1 tax.
For whom is the old tax regime good?
The old tax regime is a good option for those who can claim maximum tax exemption. The more tax exemption you claim, the more tax you will be able to save. But if you cannot claim tax exemption, then the new tax regime is a better option for you.
In the old tax regime, many types of exemptions and deductions can be claimed under house rent, travel allowance, sections 80C, 80D, 80 CCD (1b) and 80CCD (2). But in the new tax regime which has a lower tax rate than the old regime, you cannot claim tax exemption in this way.
Exemption, deduction claim and how much tax on how much salary?
There has been a change in the new tax regime, after which the standard deduction has been increased from Rs 50,000 to Rs 75,000, whereas in the old tax regime this exemption is only Rs 50,000. Accordingly, for those who have chosen the old tax regime, the government has kept the standard deduction at Rs 50,000 only. Despite this, you can save equal or more tax in the old tax regime than in the new tax regime by claiming exemptions and deductions.
How? We are telling you-
1. Annual salary- 7.75 lakh- If your annual salary is Rs 7.75 lakh and you choose the old tax regime and claim Rs 325,000 exemption and deduction, then you will not have to pay a single rupee tax. Even if you choose the new tax regime, you get a standard deduction of Rs 75,000 and even then you will not have to pay a single rupee tax.
2. Annual salary- 10 lakh- If you claim exemption and deduction of Rs 350,000, you will have to pay tax of Rs 44,200 in the old tax regime. In the new tax regime, which has been revised in the budget, you will also be charged Rs 44,200 tax on a salary of Rs 10 lakh. This means that only if you claim exemptions and deductions of more than Rs 3.5 lakh, you will get benefits in the old tax regime as compared to the new tax regime.
3. Annual salary 12.5 lakh- If you choose the old tax regime and claim exemption and deduction of Rs 431,250, then you will have to pay tax of Rs 79,300. Even in the new revised tax regime, you will have to pay tax of Rs 79,300. The more deductions and exemptions you claim from Rs 431,250, the more money you will save in the old regime.
4. Annual salary- 15.75 lakh- If your salary is Rs 15.75 lakh and you choose the old tax regime and claim exemption and deduction of Rs 483,333, then you will have to pay tax of Rs 145,600. Even in the new tax regime, you will have to pay tax of Rs 145,600 on the same income.
5. Annual salary- 20 lakhs- If your annual salary is Rs 20 lakh, then by choosing the old tax regime and claiming exemption and deduction of Rs 483,333, you will have to pay tax of Rs 278,200. At the same time, under the new tax regime on a salary of Rs 20 lakh, you will have to pay tax of Rs 278,200.