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The Union Budget 2023 introduced the optional new tax slab rates u/s 115BAC of the Income Tax Act. Since then, there has been confusion looming about choosing between the old and new regimes. Reviewing the two can help you decide.
Understanding the New Tax Regime
The new tax regime has lower tax rates, a higher rebate slab of Rs. 7 Lakhs, and a maximum surcharge of 25%. However, it does not offer the 70-odd deductions of the old tax regime. Here are some of the common deductions excluded from the new regime:
Comparing Old and New Regime Slab Rates for Assessment Year 2024-25
Here’s a comparison between the old and new tax regimes to give you a quick run-through of the different applicable tax rates.
Income Tax Slab
|
Old Regime |
New Regime |
Up to Rs. 2.50 Lakhs |
Nil |
Nil |
Rs. 2.50 Lakhs-Rs. 3 Lakhs |
5% (100% rebate u/s 87A) |
Nil |
Rs. 3 Lakhs-Rs. 5 Lakhs |
5% (100% rebate u/s 87A) |
5% (100% rebate u/s 87A) |
Rs. 5 Lakhs-Rs.6 Lakhs |
20% |
5% (100% rebate u/s 87A) |
Rs. 6 Lakhs-Rs. 7.50 Lakhs |
20% |
10% (100% rebate u/s 87A) |
Rs. 7.50 Lakhs-Rs. 9 Lakhs |
20% |
10% |
Rs. 9 Lakhs-Rs. 10 Lakhs |
20% |
15% |
Rs. 10 Lakhs-Rs. 12 Lakhs |
30% |
15% |
Rs. 12 Lakhs-Rs. 12.50 Lakhs |
30% |
20% |
Rs. 12.50 Lakhs-Rs. 15 Lakhs |
30% |
20% |
Above Rs. 15 Lakhs |
30% |
30% |
Here’s when you can make a choice:
In a nutshell, the new regime can benefit low- and middle-income individuals with its lower tax slabs and rates. However, if you don't want to miss out on salary exemptions, the old regime may be a better option. Moreover, you can always offset higher rates of the old regime by investing in term insurance or the best pension plans in India.
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# The above stated income tax slabs and tax benefits, deductions/exemptions are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time.
# It is requested to seek tax advice of your Chartered Accountant or personal tax advisor with respect to your personal tax liabilities under the Income-tax law.