Home > Income Tax > Help Center > Old vs New Tax Regime Last Updated: Aug 02nd 2024
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
- Rates of taxes and Tax Slabs Comparison
- Availability of Deductions
- Increased take home Salary
- Reduced compliances and Paperwork
- How to select which Tax Regime is right ?
- Exemptions and Deductions available under New Tax Regime
1. Rates of taxes and Tax Slabs Comparison
The new tax regime provides for concessional rates of taxes for multiples slabs whereas old regime provides for standard rates of taxes
From FY 2024-25 onwards
NEW * per latest Budget 2024 on Jul 23rd 2024| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 3,00,000 | Nil |
| 2 | From Rs 3,00,001 to Rs 7,00,000 | 5% |
| 3 | From Rs 7,00,001 to Rs 10,00,000 | 10% |
| 4 | From Rs 10,00,001 to Rs 12,00,000 | 15% |
| 5 | From Rs 12,00,001 to Rs 15,00,000 | 20% |
| 6 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
For FY 2023-24
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 3,00,000 | Nil |
| 2 | From Rs 3,00,001 to Rs 6,00,000 | 5% |
| 3 | From Rs 6,00,001 to Rs 9,00,000 | 10% |
| 4 | From Rs 9,00,001 to Rs 12,00,000 | 15% |
| 5 | From Rs 12,00,001 to Rs 15,00,000 | 20% |
| 6 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
From FY 2020-21 to FY 2022-23
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 2,50,000 | Nil |
| 2 | From Rs 2,50,001 to Rs 5,00,000 | 5% |
| 3 | From Rs 5,00,001 to Rs 7,50,000 | 10% |
| 4 | From Rs 7,50,001 to Rs 10,00,000 | 15% |
| 5 | From Rs 10,00,001 to Rs 12,50,000 | 20% |
| 6 | From Rs 12,50,001 to Rs 15,00,000 | 25% |
| 7 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
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
- Standard Deduction of Rs 50000 (upto FY 2022-23). For FY 2023-24, Budget 2023 has extended the benefit of standard deduction Rs. 50,000. Later in FY 2024-25 general Budget announced on Jul 23rd 2024, it was revised to Rs. 75,000.
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Entertainment Allowance
- Professional Tax (PT)
- Interest paid on Housing Loan u/s 24
- 80C Deductions like LIC, Home Loan Principal, PPG, NSC etc
- 80D Deduction i.e., Health Insurance paid for self and family
- 80DD and 80U related to Disability
- Interest paid on Education loan u/s 80EE
- 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
Due to privacy issues, generally the employers in other major countries do not consider your other income in calculating TDS or withholding tax.
But in India with the Old Tax Regime, often times, employers go overboard in asking more information than it's really needed. This not only puts burden on employer and it's HR department / function but also crosses the line of what's actually needed and what's being asked.
Hence, new tax regime in a way stop this practice and to have the employee takes care of the taxes for salary and any other income or investments.