Old Tax Regime vs New Tax Regime: Which One You Would Opt For?

The Union Budget 2023 was presented on February 1, which highlighted certain changes in the new tax regime. Let us understand them to see which one would suit your requirement.  

The budget this year was announced with some major modifications to the new income tax regime. The key highlights included reduced tax rates and a rebate on tax for income up to INR 7 lakh under the new regime.

Let’s see how it looks when compared with the old income tax regime? But before that here are some key highlights of the Budget 2023 with regard to the healthcare and insurance sector:

• No changes have been made in the old tax regime.
• The new tax regime will be considered the default one. However, it will be the discretion of the taxpayers to opt for any of the tax regime – new or old.
• No tax would be levied on income up to INR 7 lakh per annum under the new tax regime .
• Government also proposed the reduction of highest surcharge rate to 25% from 37% under the new regime.
• The government proposes to remove tax-free status on certain insurance policies with premium above INR 5 lakh.

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New Rates of the Revised Tax Slabs

New Income Tax Slab – Tax Under New Tax Regime

Old Income Tax Slab – Tax Under Old Tax Regime

The budget 2023 gave a new dimension to the new tax regime. It not just reduced the tax rates, but also introduced standard deductions. On the other hand, the old regime tax slab was not altered at all. Further to it, the new tax regime has been made the default tax structure with wide cover.

Know More: Union Budget 2023 Old vs New Tax Regime – The Changes to Look For 

What all changes are made in the New Tax Regime?

Here are the major changes announced:

• Rebate for income extended for up to INR 7 lakh under the new tax regime

Right now, people who earn an income of up to INR 5 lakh are not paying tax on income under both the tax regimes. However, after the latest announcements people earning an income of up to INR 7 lakh are safe from tax liabilities.

• The budget introduced a standard deduction of INR 50,000 under the new tax regime

A salaried taxpayer can now avail a deduction of INR 50,000 from the total taxable income under the new income tax regime

• The new budget also balanced tax slabs under the new tax regime as mentioned in the table above. These new changes are likely to offer huge relief to all taxpayers choosing the new tax regime
• Also, the option of no tax being levied on income up to INR 7 lakh comes as a huge relief for the salaried people

New Vs Old Tax Regime: Which One You Would Opt For?

Now you know the various changes being made to the new income tax regime and how different they are from the old tax regime. So, which one do you think would suit you?

The new income tax regime allows a taxpayer earning over INR 7.5 lakh per annum the option to stay away from paying tax considering the fact that there is an INR 50,000 standard deduction being introduced. But what if your income is higher than that as per the income tax brackets India?

Further, you must also remember that nothing has changed under the income tax slabs old regime, which has been the mainstay for taxpayers in India for a long time now with enough scope for tax savings.

To Conclude 

Both the tax regimes have their advantages and disadvantages. It actually depends on your income and the tax saving plans that you have opted for along with a lot of other things, to decide on the right tax slab to choose from.

So, choose between old and new tax regime prudently and wisely after taking into consideration all the Ifs and Buts and pros and cons.

Related Articles by PayBima

• Section 115BAC of Income Tax Act – Features of the New Tax Regime and its Benefits
• Income Tax Slabs Old Regime for Individual, Senior Citizens and Super Seniors FY 2022-23
• Income Tax Saving: How Section 80C Of The Income Tax Act Works

 

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