- 30-Apr-2025
- Personal Injury Law
In India, taxpayers have the option to choose between two tax regimes—the old tax regime and the new tax regime. The old tax regime offers several tax deductions and exemptions, whereas the new tax regime provides lower tax rates but removes most of these benefits. The choice between the two depends on the individual’s income level and the available deductions, and it requires careful evaluation to maximize tax savings.
The old tax regime has higher tax rates but offers a wide range of deductions and exemptions that can lower taxable income. The tax slabs for individual taxpayers (below 60 years of age) are:
The new tax regime provides lower tax rates but eliminates most exemptions and deductions. The tax slabs for individual taxpayers (below 60 years of age) under the new tax regime are:
The old tax regime allows taxpayers to claim various deductions and exemptions, which can reduce taxable income. Some of the key deductions are:
The new tax regime eliminates most of the deductions and exemptions, including:
However, a taxpayer can still claim a rebate under Section 87A if their taxable income is up to ₹5 lakh (for both old and new tax regimes).
The old tax regime has higher tax rates compared to the new regime but allows taxpayers to save taxes through various exemptions and deductions.
The new tax regime offers lower tax rates but removes the ability to claim exemptions and deductions, which makes it beneficial for taxpayers who do not have many tax-saving investments or expenses.
The old tax regime is beneficial for taxpayers who have a lot of deductions and exemptions, such as those with large home loan interest payments, insurance premiums, or investments under Section 80C. It allows taxpayers to reduce their taxable income significantly.
The new tax regime is suited for taxpayers who do not have many deductions or exemptions and prefer the simplicity of lower tax rates without the need for managing investments or keeping track of expenses. It is more beneficial for individuals who prefer lower compliance or have fewer deductions.
Individual and Hindu Undivided Families (HUF) can switch between the old and new tax regimes every year while filing their returns. This allows taxpayers to choose the tax regime that benefits them the most in any given year, based on their income and eligible deductions.
Let’s consider two individuals with a gross income of ₹10,00,000:
They claim deductions under Section 80C (₹1.5 lakh) and Section 80D (₹25,000 for health insurance), resulting in a total deduction of ₹1.75 lakh.
Taxable Income = ₹10,00,000 - ₹1,75,000 = ₹8,25,000.
Tax Calculation:
Total Tax = ₹12,500 + ₹65,000 = ₹77,500.
Plus 4% Cess = ₹3,100.
Total Tax Payable = ₹80,600.
The taxable income remains ₹10,00,000, as there are no deductions.
Tax Calculation:
Total Tax = ₹12,500 + ₹25,000 + ₹37,500 = ₹75,000.
Plus 4% Cess = ₹3,000.
Total Tax Payable = ₹78,000.
Answer By Law4u Team
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