Home > Help Center > Old vs New Tax Regime Last Updated: Apr 16th 2020

Difference between Old Tax Regime and New Tax Regime

Budget 2020 has introduced the new tax regime for FY 2020-21 in addition to the old tax regime. FY 2020-21 onwards the taxpayer can choose the best tax regime based on the tax saving potential, practicality, and immediate needs.

This document covers
  1. Rates of taxes and Tax Slabs Comparison
  2. Availability of Deductions
  3. Increased take home Salary
  4. Reduced compliances and Paperwork
  5. How to select which Tax Regime is right ?

1. Rates of taxes and Tax Slabs Comparison

The new regime provides for concessional rates of taxes for multiples slabs whereas old regime provides for standard rates of taxes

Tax SlabOld RegimeNew Regime
0 – 2,50,0000%0%
2,50,000 – 5,00,0005%5%
5,00,000 – 7,50,00020%10%
7,50,000 – 10,00,00020%15%
10,00,000 – 12,50,00030%20%
12,50,000 – 15,00,00030%25%
More than 15,00,000 *30%30%

Above Rs. 50L taxable income attracts Education cess is 4% and Surcharge starts @ 10%.

2. Availability of Deductions

The new tax regime does not allow the taxpayer to avail certain deductions and exemptions whereas the old regime provides that the taxpayer can claim deductions and exemptions which are available to him.

Some of the deductions that the taxpayers will be loosing if they select the new regime are

  1. Standard Deduction of Rs 50000
  2. House Rent Allowance (HRA)
  3. Leave Travel Allowance (LTA)
  4. Entertainment Allowance
  5. Professional Tax (PT)

  6. Interest paid on Housing Loan u/s 24
  7. 80C Deductions like LIC, Home Loan Principal, PPG, NSC etc
  8. 80D Deduction i.e., Health Insurance paid for self and family
  9. 80DD and 80DDB related to Disability
  10. Interest paid on Education loan u/s 80EE
  11. Donations u/s 80G, 80GGA, 80GGC

3. Increased take home Salary

New Tax Regime provides an opportunity to increase the take home salary of the taxpayer and is not required to invest upfront, whereas the old tax regime reduce take home as the taxpayers is required to invest in certain long-term investments to avail the benefits.

4. Reduced compliances and Paperwork

Under New tax regime, the taxpayer need not worry about the documentation and compliances as most of the exemptions and deductions are not available. Whereas the taxpayers under old regime need to have all the proofs, and in many cases the employee need to submit such proofs to the employer for claiming deductions and exemptions

5. Which Tax Regime to be Selected?

There is a lot of confusion regarding which regime to pick. But selecting the right regime helps in optimization of taxes and wealth creation in future. The Taxpayer needs to evaluate both the regimes depending on the income, deductions, exemptions etc and select the right regime.

The tools available to correctly select the right tax regime are to use an 1) Old vs New Tax Calculator or 2) Taking an Expert Tax Consultation from EZTax.in to review, suggest the correct one.

Income Tax Calculator

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