Comparative analysis of Old Tax Regime and New Tax Regime.
The Hon’ble Finance Minister in her speech mentioned five major announcements impacting personal income tax rates and once of major announcement is tax rebate for income upto ₹ 7 lacs in new tax regime. Thus, comparing it with old tax regime individual having income (taxable income) up to ₹ 5 lacs will not have to pay any tax the new tax regime looks favourable for the taxpayers. However, the new tax regime has following demerits:
Demerits of opting for New Tax Regime:
While individuals opt for new tax regime the taxpayer have to forego various deductions and exemptions which are available in old tax regime. Some major such deduction / exemptions are below:
- Leave travel allowance (LTA)
- House Rent Allowance
- Children Education allowance
- Deduction of professional tax u/S 16(iii)
- Deduction u/S 80C and many more
Opting out of new tax regime:
It’s imperative to note that individuals deriving income from business or profession, who opt for the default tax regime as described above, are bound by this choice for the subsequent assessment year. Should they decide to forgo this option, they forfeit the ability to opt for it again in the future, unless they cease to have any income from business or profession.
Comparison of Income tax Slab rates under new tax regimes for PY 2022-23 & 2023-24:
| Rates of taxing income | Income slab (₹) under new tax regime upto PY 2022-23 | Income slab (₹) From PY 2023-24 |
| 0% | Upto 2,50,000 | Upto 3,00,000 |
| 5% | 2,50,001 to 5,00,000 | 3,00,001 to 6,00,000 |
| 10% | 5,00,001 to 7,50,000 | 6,00,001 to 9,00,000 |
| 15% | 7,50,001 to 10,00,000 | 9,00,001 to 12,00,000 |
| 20% | 10,00,001 to 12,50,000 | 12,00,001 to 15,00,000 |
| 25% | 12,50,001 to 15,00,000 | |
| 30% | 15,00,000 and above | 15,00,000 and above |
Deciphering the Superior Tax Regime: Old or New?
A compartitive analysis is drawn below side by side under old tax regime and new tax regime with an example of different quantum of incomes for better understanding.
| (A) Income (PY 2023-24) – Interest on saving bank accounts is extra
(Assuming Salary income as the only source of income) |
5,00,000 | 7,00,000 | 9,00,000 | 10,00,000 | 15,00,000 |
| ₹ | ₹ | ₹ | ₹ | ₹ | |
| (B) Standard deduction | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 |
| (C) Other deductions | |||||
| u/s 80C | 1,50,000 | 1,50,000 | 1,50,000 | 1,50,000 | 1,50,000 |
| u/s 80D | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 |
| NPS by choice | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 |
| Bank. Int u/s 80TTA | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 |
| Housing loan int. | 2,00,000 | 2,00,000 | 2,00,000 | 2,00,000 | |
| Net taxable income under old regime (A-B-C) | 25,000 | 4,25,000 | 4,25,000 | 5,25,000 | 10,25,000 |
| Net taxable income under new tax (A-B) | 4,60,000 | 6,60,000 | 8,60,000 | 9,60,000 | 14,60,000 |
| Tax (Net of Rebate) in old tax regime | NIL | NIL | NIL | 17,500 | 1,20,000 |
| ETR in old regime | – | – | – | 1.75% | 8% |
| Tax (Net of Rebate) in old tax regime | NIL | NIL | 41,000 | 54,000 | 1,42,000 |
| ETR in new tax regime | – | – | 4.56% | 5.4% | 9.47% |
| Beneficial | Neutral | Neutral | Old | Old | Old |
(*this does not include cess at 4%)
It is evident that selection of tax regime depends on the quantum of income and deductions and allowances one can claim.
For instance, if a taxpayer has investments in tax-saving instruments, pays premiums on life or a medical insurance policy, children’s education fee, home loan principal repayment, etc., and avails the benefit of the deduction for HRA, LTA, etc. it may be more beneficial to opt for old tax regime since the benefit of deduction/exemption can be availed in the old tax regime only.
On the other hand, if individual is not having any of the above allowances/deduction then for income falling within Rs.7,00,000 bracket need not pay any tax in view of rebate u/s. 87A under new regime and the same can be availed without making any actual investments in tax saving instruments or med claim.
In addition to all these, there is no extension of benefit for senior and super senior citizens available in old tax regime falling in age bracket 60 to 80 years and above. Before Finance Bill 2023 the threshold limit applicable to them is 3,00,000 and 5,00,000 in accordance with their age and which is still same in old tax regime unless they opt for new tax regime foregoing investments and deduction which will be a very rare case since taxpayers in this age bracket are keener to have steady income and safe tax saving investments.
Software Solutions Available on:
TDS | PAYROLL | WEB PAYROLL | WEB HRMS | XBRL | FIXED ASSET |INCOME TAX| SERVICE TAX | DIGITAL SIGNATURE | ATTENDANCE MACHINE & CCTV | DATA BACKUP SOFTWARE | PDF SIGNER
“Our Products & Services”
Sensys Technologies Pvt. Ltd.
HO: 904, 905 & 906, Corporate Annexe, Sonawala Road, Goregaon East, Mumbai- 400 063.
Call: +91 766 990 4748
Email: contact@hrmthread.com | Website: http://www.hrmthread.com
Branches: Delhi & NCR | Pune | Bangalore | Hyderabad | Ahmedabad | Chennai | Kolkata
