New Tax Regime vs Old Tax Regime: As soon as the new financial year 2024-25 starts, the headache of choosing new income tax regime or old income tax regime for tax saving has come to the fore. But here you will get the solution which tax regime to choose will be beneficial for us.Â
New Tax Regime vs Old Tax Regime: Â The new financial year 2024-25 has started. Now taxpayers have to be told where and how much to invest in this financial year if they choose the old tax system. In the month of April, the company or institution or any employer asks the employees to choose the tax structure for 2024-25. According to the Central Board of Direct Taxes, this option is for the taxpayers to take a one-time decision. Once a taxpayer selects an income tax regime (new or old), his income will be taxed accordingly. In which there will be an option to switch during filing of next year’s tax return (ITR). The important thing to note is that the new tax system is the default option. Those who miss the deadline to opt for the tax regime will automatically be placed under it.
New Income Tax Regime vs Old Income Tax Regime
The new income tax regime offers wider tax slabs and lower rates but does not have many deductions like HRA, LTA and deductions for investments, insurance and loan interest. There is no need to present any proof of new income tax system and investment or expenditure. In the old tax system, all proofs of all investments and expenses had to be submitted.
Income tax slab under the old tax system for the financial year 2024-25
| Income Range (in Rs) | tax rate |
| 250,000 | zero |
| 250001 to 500000 | 5% |
| 500001 to 10,00000 | 20% |
| more than 10,00000 | 30% |
Income tax slab under the new tax system for the financial year 2024-25
| Income Range (in Rs) | tax rate |
| up to 300,000 | zero |
| 300001 to 600000 | 5% |
| 600001 to 900000 | 10% |
| 900001 to 1200000 | 15% |
| 1200001 to 1500000 | 20% |
| over 1,500,000 | 30% |
The new income tax regime also benefits young earners and senior citizens who do not prefer to tie up money in tax saving instruments. Apart from this, tenants facing challenges in providing rent related documents, landlord’s PAN etc. will find the new income tax regime convenient. On the other hand, the old tax system has its advantages. Income tax relief is available under Section 87A if the taxable income after deduction is less than Rs 5 lakh. Interestingly, utilizing all exemptions and deductions can result in zero tax for taxpayers with income up to Rs 10 lakh! Pay attention to below to understand it better
| Taxable Income (in Rs) | 10,00,000 |
| standard deduction | 50,000 |
| Investment under section 80C | 1,50,000 |
| Home Loan Interest Deduction or HRA | 2,00,000 |
| Investing in NPS | 50,000 |
| Health Insurance (self or parents) | 50,000 |
| medical bill | 5000 |
| total taxable income | 4,95,000 |
| taxes to pay | zero |
Under the new income regime, no tax will be applicable if taxable income is less than Rs 7 lakh, with a standard deduction of Rs 50,000 for salaried taxpayers. This means that individuals with taxable income up to Rs 7.5 lakh will have to pay zero tax without the compulsion to invest in tax saving schemes. That means there will be no tax.
