It’s tax-filing season, and especially for private sector employees, the time has come to plan and calculate carefully. However, a large number of salaried individuals are still confused about whether they should choose the new income tax regime or stick to the old income tax regime.
Tax slabs under the new income tax regime
Under the new regime, there is no tax on income up to ₹3 lakh.
- Income between ₹3 lakh and ₹7 lakh is taxed at 5%
- Income between ₹7 lakh and ₹10 lakh is taxed at 10%
- Income between ₹10 lakh and ₹12 lakh is taxed at 15%
- Income between ₹12 lakh and ₹15 lakh is taxed at 20%
- Income above ₹15 lakh is taxed at 30% (same as before)
No benefit of deductions in the new regime
In the new tax regime, you cannot claim several deductions and exemptions. Popular benefits like deductions under Section 80C, Section 80D, and home loan interest are not available.
However, the advantage of the new regime is that you pay zero tax on income up to ₹12 lakh, provided you meet the rebate conditions. This benefit is not available in the old regime.
New regime (simplified):
| Annual Income | Tax Rate |
|---|---|
| Up to ₹3 lakh | 0% |
| ₹3 lakh – ₹6 lakh | 5% |
| ₹6 lakh – ₹9 lakh | 10% |
| ₹9 lakh – ₹12 lakh | 15% |
| ₹12 lakh – ₹15 lakh | 20% |
| Above ₹15 lakh | 30% |
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Old income tax regime
The old regime offers more than 70 exemptions and deductions, which is why it is still preferred by many taxpayers. The most popular is the deduction under Section 80C, which allows up to ₹1.5 lakh to be reduced from your taxable income.
Key exemptions and deductions under the old regime include:
- Employee’s contribution to EPF
- Leave Travel Allowance (LTA) exemption
- House Rent Allowance (HRA) exemption
- Employer’s contribution to NPS under Section 80CCD (2)
- Health insurance premium deduction under Section 80D
Old regime tax slabs:
| Annual Income | Tax Rate |
|---|---|
| Up to ₹2.5 lakh | 0% |
| ₹2.5 lakh – ₹5 lakh | 5% |
| ₹5 lakh – ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
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Key points:
- No tax on income up to ₹2.5 lakh.
- 5% tax for income between ₹2.5 lakh and ₹5 lakh.
- 20% tax for income between ₹5 lakh and ₹10 lakh.
- 30% tax for income above ₹10 lakh.
The choice between the old and new regimes depends on your income structure and how much you can claim under deductions and exemptions.