There are two systems of Income Tax in the country. New Tax Regime and Old Tax Regime. Finance Minister Nirmala Sitharaman had made major changes in the New Tax Regime while presenting the General Budget 2023. Under the new tax regime, the government has made the amount up to seven lakh rupees tax free. But after this announcement by the government, taxpayers started doing calculations to choose between new and old tax regime. But after reaching a level of annual income, equal tax will be levied in both the tax regimes. How will this multiplication and maths fit… Let’s understand.
Which regime is suitable for whom?
In the new tax regime, income up to Rs 7 lakh per annum is tax free, but the benefit of any kind of deduction will not be available in it. Deduction of up to Rs 1,50,000 is available under 80C on the old tax regime. Therefore, the new tax regime can prove beneficial for those who have not made any investment and do not have a home loan. If someone has invested in a savings scheme, then only the old tax system will prove to be favorable for him.
benefit of deduction
On what amount of annual income, any taxpayers will have to pay equal tax in both the tax regimes. Understand its calculation. According to envelope calculation, if the annual income of a taxpayer is Rs 16 lakh. If he chooses the old tax regime for a deduction of Rs 4.25 lakh (50,000 standard deduction, 2 lakh home loan interest, 1.5 lakh under 80C, Rs 25,000 under 80D for health insurance) then he will have to pay the same income tax, As much income will have to be paid under the new tax regime.
tax will be same
Under the old tax regime, a deduction of Rs 4,25,000 can be availed. In this situation, if your annual income is Rs 16,00,000, then you can choose the old tax regime or the new one… tax will have to be paid equally.
The main difference between the old and new tax regime is that under the new tax regime, you cannot avail deductions like 80C, 80D and 24B. While you can avail all these benefits under the old system by including deductions and exemptions.
On what income will equal tax be levied?
| income | old tax regime | new tax regime | Savings | who better |
| 10,00,000 | 28,600 | 54,600 | 26,000 | Old |
| 11,00,000 | 49,400 | 70,200 | 20,800 | Old |
| 12,00,000 | 70,200 | 85,800 | 15,600 | Old |
| 15,00,000 | 1,40,400 | 1,45,600 | 5,200 | Old |
| 16,00,000 | 1,71,600 | 1,71,600 | 00 | Both |
| 20,00,000 | 2,96,400 | 2,96,400 | 00 | Both |
| 25,00,000 | 4,52,400 | 4,52,400 | 00 | Both |
| 30,00,000 | 6,08,400 | 6,08,400 | 00 | Both |
| 35,00,000 | 7,64,400 | 7,64,400 | 00 | Both |
| 40,00,000 | 9,20,400 | 9,20,400 | 00 | Both |
| 45,00,000 | 10,76,400 | 10,76,400 | 00 | Both |
| 50,00,000 | 12,32,400 | 12,32,400 | 00 | Both |
(Note: Before taking tax related decisions, consult experts once)
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