As ,We are aware of the major announcement in personal income tax on 1st Feb 2023 by Union Minister for Finance and Corporate Affairs – India, Smt. Nirmala Sitaraman summarizes sustainability benefits for the hardest-working middle class of the country.
At the same time many of us were curious to know, what would be the major differences between the Old vs. New Income Tax Regime –Which one must be, choose for whom?
This is the most common query for today’s Indian citizens, as this article will walk through and simplifies the difference between the old & new income tax regime and which must be chosen for whom?
About New Income Tax Regime:
The new slab comes with new slabs and a lower tax rate but no way to reduce taxable income. The Indian government has introduced a new income tax regime intending to simplify the taxation structure and provide more benefits to taxpayers.
About Old Income Tax Regime:
The old and new income tax regimes have different rules and regulations which can make it difficult for taxpayers to decide which one they should go with. This article will simplify & compare the two regimes and provide insight to make you confirm which one is more beneficial for taxpayers.
This article will walk you through different aspects of both regimes, such as tax rates, deductions, exemptions, etc. so that taxpayers can make an informed decision about their taxes.
With the introduction of the new income tax regime in India, taxpayers hav the choice to opt for either the old or new system.
The new tax regime offers several benefits and incentives, including lower tax rates, more deductions, and exemptions. However, it also has some drawbacks mostly important to be taken into consideration before opting for it. In this article, we will compare the old and new income tax regimes to help you decide the one which is most suitable for you.
We will discuss various aspects as deductions available under each regime, taxation of long-term capital gains, and other focal points that should be taken in to consideration while making a decision.
This new regime is optional one & taxpayers can choose between the old and the new tax regimes. The main difference between the two regimes is that the new regime offers lower tax rates but with fewer deductions, while the old regime allows for more deductions but with higher tax rates.
As we can notice the minister’s first announcement was majorly focused in to relief for middle-class individuals, changing the tax structures in the new personal income tax regime as mentioned below.
Tax Rates Applicable under Old Vs New Regime:
Example for Old Vs New Tax Regime:
If your income is between Income from INR 5 lakhs to INR 7.5 lakhs tax payable under the old tax rate is 65,00 & the new tax rate is 39,000 here the total savings are 26,00. However, the new tax regime arises with more slabs and a minor tax rate but there is no way to reduce taxable income & the old tax regime allows you to claim deductions and exemptions of various natures to reduce the tax.
Here the challenging part is to optimize our investments every year to reduce the taxable incomes; The choice between these two regimes depends on individual circumstances such as income, investments, and other factors. It is important to understand all aspects of both regimes before making a decision on which one to opt for.
But to make your decisions easy here are the exemptions and deductions not covered under the new tax regime & covered under the old one such as
Exemptions and deductions:
- Standard deductions of salaries like –transport allowance & medical reimbursement
- Professional tax
- Leave travel allowances
- House rent allowance
- Interest paid on home loans
- Family pensions
- Special allowance
- Contribution to various investments such as PF, EPF, NSC, etc.,
- Interest in home & education loans
Al most of the deductions made under Chapter VI-A of the Income Tax Act (such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE, 80G, and 80GGA, etc) cannot be claimed under the new concessional income tax regime
I hope this article will provide an overview of both the old and new income tax regimes in India and help you decide which is best suited to your needs, there must be a tax planning strategy even for individuals.
Feel free to contact and get advice from a virtual professional Tax planning & strategist from the leading Accounting and bookkeeping services providers in Hyderabad.
