This has reignited the debate between the New Tax Regime and the Old Tax Regime, with individuals weighing the benefits of each to determine the more advantageous option.
The Union Budget 2024 brought significant changes to the New Tax Regime, introducing revised tax slabs and enhanced deductions aimed at reducing the tax burden for taxpayers. This has reignited the debate between the New Tax Regime and the Old Tax Regime, with individuals weighing the benefits of each to determine the more advantageous option.
While the Old Tax Regime remains unchanged in terms of slabs, rates, and deductions, the New Tax Regime has undergone revisions designed to make it more appealing:
Adjusted tax slabs: The new slabs aim to reduce taxes for those with incomes up to Rs 10 lakh.
Higher standard deduction: The standard deduction has been increased from Rs 50,000 to Rs 75,000.
Enhanced NPS deduction: The deduction on employer contributions to the National Pension System (NPS) has been raised to 14%, up from 10%.
Increased deduction for family pensioners: Family pensioners can now claim a deduction of Rs 25,000, up from Rs 15,000.
Up to Rs 3 lakh: 0%
Rs 3 lakh to Rs 7 lakh: 5%
Rs 7 lakh to Rs 10 lakh: 10%
Rs 10 lakh to Rs 12 lakh: 15%
Rs 12 lakh to Rs 15 lakh: 20%
Above Rs 15 lakh: 30%
To illustrate the difference, consider a salaried taxpayer earning Rs 7.75 lakh annually:
Under the Old Tax Regime, the tax liability would be approximately Rs 59,800, factoring in a standard deduction of Rs 50,000 and no additional exemptions.
Under the New Tax Regime, with the revised standard deduction of Rs 75,000, no tax would be payable.
Similarly, a salaried employee earning Rs 16 lakh would have a tax liability of Rs 1.71 lakh under the current New Tax Regime, which would drop to Rs 1.53 lakh under the proposed New Tax Regime, offering savings of Rs 18,200.
New Tax Regime: Suitable for individuals with fewer eligible deductions or simpler financial arrangements, benefiting directly from lower rates and higher standard deductions.
Old Tax Regime: More advantageous for those who can claim multiple deductions, such as HRA, LTA, Section 80C benefits, and health insurance premiums under Section 80D.
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