New vs Old Income Tax Regime: While presenting the budget for the financial year 2024-25, Finance Minister Nirmala Sitharaman has given relief to the taxpayers by changing the income tax slab in the new income tax regime. Not only this, the limit of standard deduction for salaried class people adopting the new income tax regime has also been increased from Rs 50,000 to Rs 75,000. According to the Finance Minister, this will benefit taxpayers by Rs 17,500 in the new income tax regime. But no relief has been given to those taxpayers who have adopted the old tax regime. No change has been made in the tax slab of the old tax regime nor has there been any increase in the standard deduction for them.
Which tax regime should taxpayers choose?
In such a situation, taxpayers are in a dilemma. For taxpayers, the new income tax regime will be better than the old tax regime. For example, let us talk about salaried taxpayers whose annual income is Rs 10 lakh. For such taxpayers, the new income tax regime will be better or the old one.
How much tax will have to be paid in the old regime?
If the annual income of a taxpayer is Rs 10 lakh, then under the old income tax regime, he will get the benefit of standard deduction of Rs 50,000. After which his taxable income reduces to Rs 9,50,000. If the taxpayer has taken a home loan and is paying interest on the loan, then he can avail the facility of deduction from income on payment of interest up to Rs 2 lakh. In such a situation, the taxable income of the taxpayers reduces to Rs 7,50,000. And from children’s school tuition fees, premium payment on insurance policy and contribution to EPF, deduction can be obtained on investment savings under section 80C of Income Tax up to Rs 1.50 lakh. After this, the taxable income reduces to Rs 6 lakh. And if the taxpayer has taken a mediclaim policy, then deduction can be claimed from income on payment of premium of Rs 25,000 annually. In such a situation, the total taxable income of taxpayers will be reduced to Rs 5.75 lakh. Under the old tax regime, taxpayers will have to pay a tax of Rs 27,500 and if 4% cess is added to it, the total tax liability will be Rs 28,600.
How much tax will be levied in the new tax slab of the new regime?
If we calculate the tax liability on taxpayers under the new income tax regime, then assume that the gross salary of the taxpayer is Rs 10 lakh. Out of which Rs 75,000 will now get the benefit of standard deduction. After which the taxable salary will be reduced to Rs 9,25,000. After the change in the tax slab in the new tax regime, taxpayers will get tax exemption on income up to Rs 3 lakh. But on income of Rs 3 to 7 lakh, tax will have to be paid at the rate of 5 percent, which amounts to Rs 20,000. After this, on the income slab of Rs 7 lakh to Rs 10 lakh, tax of Rs 30,000 will be levied at the rate of 10 percent tax rate. That is, salaried taxpayers adopting the new income tax regime, whose annual income is Rs 10 lakh, will have to pay a tax of Rs 50,000. And if we add cess at the rate of 4% to it, then the total tax that will have to be paid will be Rs 52,000.
Tax burden on old tax slabs of new regime
If we look at the old tax slab of the new income tax regime, then the taxpayer will have to pay a tax of Rs 60,000 which would be Rs 62,400 after adding 4% cess. That is, after the change in tax slab in the new income tax regime, taxpayers will save tax of Rs 10,400. Whereas in the old tax regime, taxpayers will have to pay a tax of Rs 24,600 as compared to the new income tax regime.
Doubt over the future of the old tax regime
It is clear from this that the old tax regime is still beneficial for those taxpayers who have taken home loans or save money to save tax. But a big question arises that the way the government is engaged in making the new tax regime attractive and no changes are being made in the old tax regime and the way the Finance Minister has talked about reviewing the income tax law in the next six months, there is uncertainty about the future of the old tax regime.
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