Choosing the right tax regime is a very crucial and complicated process because it can affect your tax liability. Please keep in mind a few points while calculating your year’s tax or filing a tax return.
- Deduction:
This is one of the major key differences in both the tax regimes because there is no deduction allowed in the New Tax regime. So, if you have any deductions like House Rent Allowance (HRA), Section 80C (LIC, PPF, ELSS, Tuition Fee, etc.), Leave Travel Allowance (LTA), Other allowance, health insurance, home loan interest, etc., then you can choose Old Tax regime rather than New Tax regime.
- Common Standard deduction:
There is one common deduction allowed in both tax regimes. This common deduction is called a standard deduction of INR 50000 from Salary head income.
- Marginal Tax Relief:
This relief is available only under the New Tax regime, if your income after the standard deduction is between 7 lacs and 7.27 Lacs then you can claim marginal tax relief which is equivalent to the difference amount between the 7 lacs and 7.27 lacs.
Please see the table below for more understanding
| ANNUAL INCOME | TAXABLE INCOME AFTER STANDARD DEDUCTION | TAX LIABILITY AS PER THE NEW TAX REGIME | EXCESS AMOUNT ABOVE 7 LAKH (ACTUAL TAX LIABILITY) | MARGINAL RELIEF |
| 7,55,000 | 7,05,000 | 25,500 | 5,000 | 20,500 |
| 7,60,000 | 7,10,000 | 26,000 | 10,000 | 16,000 |
| 7,65,000 | 7,15,000 | 26,500 | 15,000 | 11,500 |
| 7,70,000 | 7,20,000 | 27,000 | 20,000 | 7,000 |
| 7,77,778 | 7,27,778 | 27,778 | 27,778 | 0 |
- Zero or Nil Tax
There is no tax under the New Tax Regime if your income is after a standard deduction of up to 7 lacs. So, if your income is below or equal to 7 lacs then the New Tax regime is more beneficial for you.
- Slab Rate:
Slab rates in both tax regimes are different, So, please keep this in mind before choosing a tax regime because ultimately it will affect your tax liability.
Please see the table below for the slab rate
Old Tax Regime
| Slabs | Individual Age < 60 | Individual Age > 60 but < 80 | Individuals with more than 80 |
| Up to 2,50,000 | Nil | Nil | Nil |
| 2,50,001 to 3,00,000 | 5 % | Nil | Nil |
| 3,00,001 to 5,00,000 | 5 % | 5 % | Nil |
| 5,00,001 to 10,00,000 | 20 % | 20 % | 20 % |
| Above 10,00,000 | 30 % | 30 % | 30 % |
New Tax Regime
| Slabs | Rates |
| Up to 3,00,000 | Nil |
| 3,00,001 to 6,00,000 | 5 % |
| 6,00,001 to 9,00,000 | 10 % |
| 9,00,001 to 12,00,000 | 15 % |
| 12,00,001 to 15,00,000 | 20 % |
| Above 15,00,000 | 30 % |
- Default Tax Regime
New Tax Regime from FY 2023 – 2024 Tax filing is a default regime, so if you opt-out from the new tax regime then you apply the old tax regime opt-in before the due date.
