New income tax regime vs old income tax regime: Eight key things to consider before choosing one

As the new financial year kicked in on 1 April, it is essential for salaried individuals to choose between the new and old tax regimes. Only three days are left, so decide fast as this choice will have a direct impact on your take-home salary. Based on the selection of the as your employer will deduct income from your salary. Making the wrong decision can significantly affect your take-home income. If you're one of those who are struggling to decide between the two , these tips can help you in making the correct choice at the last minute.

1) If you have income up to ₹7 lakh then the new tax regime is better, as there is no tax up to ₹7 lakh and additionally there is a standard deduction of ₹50,000 in the new tax regime. As per the changes proposed in the Budget, no tax would be levied on people with annual income of up to ₹7 lakh under the new tax regime but it made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA.

2) In case, you have no deductions to avail then consider going for the new tax regime, as tax rates are lower and there is no deduction available on investments.

3) The taxpayers under the new regime have to forgo exemptions, such as Leave Travel Allowance, House Rent Allowance, Tuition Fee, and interest on housing loans, among others.

4) New income tax slabs

 No tax would be levied for income up to ₹3 lakh

Income between ₹3-6 lakh would be taxed at 5 per cent

Income between ₹6-9 lakh would be taxed at 10 per cent

Income between ₹9-12 lakh at 15 per cent

Income between ₹12-15 lakh at 20 per cent

Income of ₹15 lakh and above will be taxed at 30 per cent.

5) Old tax slabs

Income up to ₹2.5 is exempt from taxation under old tax regime.

Income between ₹2.5 to ₹5 lakh is taxed at the rate of 5 per cent under the old tax regime.

Personal income from ₹5 lakh to ₹7.5 lakh is taxed at a rate of 15 per cent under the old regime

Income between ₹7.5 lakh to ₹10 lakh is taxed at a rate of 20 per cent in the old regime

Under the old regime, personal income above ₹10 lakh is taxed at a rate of 30 per cent.

6) New vs old tax regime

While presenting Union Budget 2023 on 1 February, Finance Minister Nirmala Sitharaman said that an individual with an annual income of ₹9 lakh will be required to pay only ₹45,000. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay in the old regime.

An individual with an income of ₹15 lakh would be required to pay only ₹1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of ₹1,87,500 Sitharaman had said.

7) NPS deduction of ₹50,000 is available under the old regime

8) The Income Tax Department has launched a tax calculator . You just need to fill in relevant details, and the calculator will determine which option works better for you.