Last updated on February 13th, 2023 at 06:19 pm
Introducing a new tax system confuses whether one is best for you. It may be difficult for you, the taxpayer, to decide which of the two regimes is superior and applicable to your income. Another query here is, from whence do you receive your income? Are you an employee managing your firm, a professional or an entrepreneur? Many of you are attempting to compare the old and new taxes in light of changes to the existing sections.
Even if there isn’t a customized strategy for every taxpayer, we compare the new and old tax regimes in this post and discuss the best course of action for your income structure. The government implemented a new tax system during Budget 2020 to significantly reduce taxpayer burdens and simplify the income tax code. Another goal is for taxpayers to stop depending on tax advisors and start filing their returns. In this article, we will learn about the Difference Between Old And New Tax Regime.
Table of Contents
Difference Between Old And New Tax Regime
Below the mentioned Difference Between Old And New Tax Regime India will help us to understand the Difference Between Old And New Tax Regime For Salaried Employees
| New Tax Regime | Old Tax Regime |
|---|---|
| The Ministry of Finance has eliminated about 70 exemptions after a comprehensive investigation. | 120 exemptions are provided under the “previous tax regime.” Not all of them provide benefits to taxpayers. Most of these make the direct tax system more complicated |
| The basic exemption ceiling has now been raised to Rs 3 lacs in an effort to improve the efficiency of the New Tax Regime for taxpayers. Every age group of taxpayers who pay taxes is affected by this. Only under the New Tax Regime is a person who earns an annual income of less than Rs 3 lacs free from paying taxes. | According to the old tax regime the exemption limit is set upto 2.5 lakhs for every age group of taxpayers. |
| In the new tax system, Finance Minister Ms. Nirmala Sitharaman has suggested lowering the maximum surcharge rate from 37% to 25%. The highest tax bracket’s maximum tax rate would drop to 39% as a result of this proposal. Previously, the highest tax bracket’s effective tax rate was 42.74%. | According to the old tax regime, the maximum surcharge rate is 37% |
| If an individual taxpayer’s total income is less than Rs. 5 lakh after deductions, Section 87A offers a tax relief. A maximum reimbursement of Rs 12,500 is currently permitted under Section 87A of the Income-Tax Act for individuals with incomes up to Rs 5 lacs. | According to the old tax regime, if the total income is more than 3 lakhs after deduction, then the individual have to pay 5% of the income tax. |
| In addition to the fundamental exemption level, the standard deduction is the amount that is not taxed. According to the Budget 2023, the Finance Minister claimed that each salaried individual with an annual income of at least Rs. 15.5 lacs would therefore stand to gain an additional Rs. 52,500 in tax savings. | Currently, the Old Regime standard deduction is Rs 50,000, and the maximum professional tax deduction is Rs 2,500. |
Difference Between Old Regime And New Regime Of Income Tax
The Difference Between Old Regime And New Regime Of Income Tax according to various income slabs is stated below:
|
Income slabs (Rs) |
Old Regime (with exemptions and deductions) |
New Regime (without exemptions and 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 |
25% |
|
|
Above 15 lakh |
30% |
New Tax Regime 2023-24
Beginning with the new tax structure. With rates starting at reduced levels for income up to Rs. 15 lakhs, it offers six tax brackets. Due to the various tax rates and income slabs, there aren’t any multiple exemptions or deductions accessible here. The new tax structure offers advantages and disadvantages. You, the taxpayer, will be placed in the tax bracket that most closely fits your yearly income because there are numerous tax brackets. The current tax system is still in place, and as a taxpayer, you can choose between the old and the new tax system based on which is most beneficial to you. The administration claims no requirement to use the new tax system. The new tax code enables people to allocate their funds in any way they see fit. With the new plan, individuals are no longer required to participate in insurance and tax-saving programs that might not keep up with their financial goals.
Old Tax Regime
Despite the high tax rates, there are several ways to reduce your tax liability. The old tax system is complicated. Through the years, the government has added provisions to the Income Tax Act, giving Indian taxpayers access to about 70 exclusions and deduction options that enable them to lower their taxable income and pay less tax.
Some exclusions, including the House Rent Allowance (HRA) and the Leave Travel Allowance, are included in your income (LTA). You can use the deductions to invest, save, or spend money on particular things to reduce your tax liability. The most well-known and substantial deduction is Section 80C, which allows you to deduct up to Rs. 1.5 lakh from your taxable income. In addition, there are several other exemptions and deductions that are often accessible to taxpayers.
Difference Between Old And New Tax Regime: FAQs
To “give up certain tax deductions and exemptions” is the fundamental prerequisite for paying tax at reduced rates on income up to Rs. 15 Lakhs.
People who get income from salaries, rental properties, capital gains, and other sources are free to choose their tax regime on an annual basis.
The lower tax rate for taxpayers is the main selling point of the new tax system. Since the tax code has been streamlined, taxpayers are not eligible for the deductions and exemptions that were previously accessible.
The New Tax Regime is introduced in Union Budget 2023-24.
A detailed table of the Difference Between the Old Regime And the New Regime Of Income Tax according to income slab is given in the article.
