From Assessment Year (AY) 2024-25 onwards, the default tax regime is the New Tax Regime. However, individual taxpayers need to evaluate their financial situation carefully and deductions to decide the most beneficial regime. Here’s a comprehensive guide to help you make an informed decision.
Tax Rebate under Section 87A
- Old Regime: Tax rebate of ₹12,500, subject to a total income of ₹5 Lakh.
- New Regime: Tax rebate of ₹25,000, subject to a total income of ₹7 Lakh.
When to Choose the New Tax Regime
If you have deductions under Section 80C only or no deductions at all, the New Tax Regime is always beneficial. This regime offers lower tax rates without the necessity to claim deductions.
When to Choose the Old Tax Regime
If you have claimed significant deductions such as home loan interest, Section 80C, and Section 80D, the Old Tax Regime may be more beneficial. This regime allows various exemptions and deductions which can reduce your taxable income substantially.
Comparison of Exemptions/Deductions: Old vs. New Tax Regime
The following table highlights the availability of various exemptions and deductions under both regimes for AY 2024-25:
| Particulars | Old Tax Regime | New Tax Regime |
|---|---|---|
| Standard Deduction [Section 16(ia)] | Available | Not Available |
| Leave Travel Concession [Section 10(5)] | Available | Not Available |
| House Rent Allowance [Section 10(13A)] | Available | Not Available |
| Official and personal allowances [Section 10(14)] | Available | Not Available |
| Allowances to MPs/MLAs [Section 10(17)] | Available | Not Available |
| Entertainment Allowance [Section 16(ii)] | Available | Not Available |
| Professional Tax [Section 16(iii)] | Available | Not Available |
| Interest on housing loan for self-occupied house property [Section 24(b)] | Available | Not Available |
| Deduction under Sections 80C to 80U | Available | Not Available |
| Set-off of any loss under the head “Income from house property” | Available | Not Available |
| Exemptions for other allowances or perquisites | Available | Not Available |
Tax Benefit for Salary Income in the Old Tax Regime for AY 2024-25
The following table illustrates the tax benefits for different salary income levels when opting for the Old Tax Regime:
| Salary Income after Standard Deduction | Where no deduction is claimed | Where a deduction under Sections 80C and 80D are claimed | Where deduction under Sections 80C and 80D are claimed | Where deduction under Sections 80C, 80D, and 24(b) are claimed |
|---|---|---|---|---|
| 6,00,000 | -33,800 | -23,400 | – | – |
| 7,00,000 | -54,600 | -7,800 | 2,600 | 36,400 |
| 8,00,000 | -39,000 | -18,200 | 7,800 | 41,600 |
| 8,25,000 | -41,200 | -20,400 | 5,600 | 39,400 |
| 9,00,000 | -49,400 | -18,200 | -2,600 | 31,200 |
| 10,00,000 | -41,200 | -26,400 | -13,800 | 20,000 |
| 11,00,000 | -61,000 | -46,200 | -23,800 | 10,000 |
| 12,00,000 | -68,800 | -49,400 | -33,800 | – |
| 13,00,000 | -86,200 | -54,600 | -38,400 | – |
| 14,00,000 | -1,06,600 | -59,800 | -44,200 | 18,200 |
| 15,00,000 | -1,17,000 | -70,200 | -54,600 | 7,800 |
Conclusion
Selecting the right tax regime requires careful consideration of your income, deductions, and overall financial goals. While the New Tax Regime simplifies the tax calculation process with lower rates, the Old Tax Regime offers numerous exemptions and deductions that can lead to significant tax savings for eligible taxpayers. Always consult with your tax advisor to choose the most advantageous option for your specific situation.