New Tax Regime: Why opting for it is more beneficial for salaried taxpayers? Check details

There are numerous advantages to opt for the new tax regime over old tax regime. One of the key reasons is the tax rates, which are lower in comparison to the old tax regime. Highest tax rate under the new tax regime is 30 percent for those who earn above ₹15 lakh (for FY 2024-25). For those who earn between ₹12 to 15 lakh, tax rate is 20 percent, whereas those earning between ₹10 to 12 lakh, tax rate is 15 percent.

While announcing these changes, Union Finance Minister Nirmala Sitharaman on July 23, 2024 said that the salaried employee will stand to save up to ₹ 17,500 in income tax under the new regime. In contrast, under the old regime – 30 percent tax rate kicks in when the income crosses ₹10 lakh in a year.

Around 73 percent of taxpayers have already opted for the new tax regime while CBDT chairman recently said that there are expectations that 90 percent taxpayers will opt for the new tax regime from the next year.

Standard Deduction

Standard deduction for the salaried employees was raised from ₹50,000 to ₹75,000 last year, whereas the deduction allowed under old tax regime is still ₹50,000.

Deductions allowed under the new tax regime

Although most common deductions are not permitted in the new tax regime, there are a few that are still given. 

I. Deduction of expenditure by employers towards NPS under section 80CCD(2): It was increased to 14 per cent of the employee’s salary in 2024 from from 10 per cent earlier.

II. Deduction under section 80CCH for contributions made to the Agniveer corpus fund.

III. Deduction under section 80JJAA: This is meant for the employers enabling eligible businesses to claim a 30 per cent deduction on additional employee recruitment costs for three consecutive assessment years.

Other key deductions

It is noteworthy to mention here that other key deductions such as those given under sections 80C, 80D, 80DD and 80G are not permitted under the new tax regime. Meanwhile, those who have opted to file their tax return under the old tax regime are entitled to claim them .

Income Tax Calculator

If you have a few investments in tax saving instruments and unsure as to which regime will turn out to be more beneficial – old or new – you can use income tax calculator where you can enter all the details with regards to income and investments to arrive at the tax computation. If tax calculated under the old tax regime is higher, you can opt for it. Else you can go for new tax regime.

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