New Tax Regime vs. Old Tax Regime: Which One is Right for You?
The government’s new tax regime has completely changed how we think about income tax. For those earning less than ₹12 lakh annually, it’s a huge relief for the middle class salaried class. It’s also caused a fair bit of confusion. Many people are still scratching their heads, trying to figure out what it actually means for their tax liability.
So, let’s break it down and clear up the doubts. We’ll keep it simple, explore how it compares to the old tax regime, and look at some real-life scenarios to see which option works best for you. Whether you’re aiming to save more or align your taxes with your financial goals, this guide will help you make the right choice. Let’s dive in
Key Insights on the New Tax Regime
Zero Tax Liability for Salaries Up to ₹12,75,000
If your annual salary income is ₹12,75,000, the new tax regime offers zero tax liability. This calculation includes the ₹75,000 standard deduction, making it highly advantageous for taxpayers within this income bracket.
Tax Liability for Higher Salaries
For an annual salary of ₹13,00,000, your tax liability under the new regime would amount to ₹66,300. At this level, evaluating whether the deductions under the old regime outweigh the simplicity of the new one becomes crucial. In the below example though there is a a tax liability for a 13 lakhs salaried individual it still offers significant benefits over the old tax regime
New Tax Regime vs. Old Tax Regime: More Deductions? The Old Regime Shines
If you have investments under Section 80C, health insurance premiums under Section 80D, or substantial home loan interest payments, the old tax regime is often the better choice. The more deductions you can claim, the higher the savings under the old system.
New Tax Regime vs. Old Tax Regime: 35 Lakh Salaried Individual
No Rent & No Home Loan: For a ₹35,00,000 annual salary without rent or home loan expenses, the new tax regime often proves more beneficial due to its straightforward structure.
With Rent: Paying ₹35,000 monthly rent and with no home loan The new tax regime will still provides better savings
With Rent and Home Loan: Paying ₹35,000 monthly rent and with the deductible component of Interest on a home loan, the old regime usually provides better savings
The attached Excel calculator will help you customize the calculation based on your deductions
New Tax Regime vs. Old Tax Regime: 70Lakh Salaried Individual
Rent & No Home Loan: For a ₹70,00,000 annual salary with rent and no home loan expenses, the old tax regime often proves more beneficial due to the deductions offered
New Tax Regime vs. Old Tax Regime: For Higher Salaries
The amount of deductions you can claim will determine which tax regime is more beneficial for you. If you prefer a straightforward approach and have no deductions, the new tax regime is an obvious choice. However, if you fall into higher salary brackets and have substantial deductions to leverage, the old tax regime could still offer greater savings.
Customizing Your Calculations
Your financial situation is unique, and a one-size-fits-all approach doesn’t work. That’s why we’ve created a customizable tax calculator to help you assess your tax liability under both regimes. By inputting your data, you can see a tailored comparison that aligns with your income, deductions, and financial goals.
Disclaimer: The calculator is designed for basic calculations and does not include components like cess, surcharges, or special exemptions. Always consult your Chartered Accountant (CA) for a comprehensive tax evaluation before making any final decisions.
TAX CALCULATOR AVAILABLE FOR DOWNLOAD
Final Thoughts and Disclaimer
The calculator is a basic tool designed to provide a fair representation of your tax scenario. It does not account for cess or apply to individuals above 60 years of age. Use it as a starting point for clarity, but be sure to consult your Chartered Accountant (CA) for personalized and expert advice.
Remember, selecting the right tax regime isn’t just about crunching numbers—it’s about optimizing your savings while aligning with your long-term financial objectives.
Ready to take charge of your taxes? Leverage our tools and expert guidance to make informed decisions that set you up for financial success. As always Stay informed, and invest wisely
About The Author:
Sanil Pinto - Stay Informed With Sanil
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Greetings. I am Sanil, the man behind the inception of Wiremesh back in 2010. I have proudly graced the pages of Silicon Magazine’s prestigious list of Ten Most Promising Investment Planning Companies in 2018. Prior to founding Wiremesh, I worked with renowned global BFSI giants such as HSBC and Barclays, channeling my expertise to assist them in expanding their horizons and generating substantial wealth for my esteemed business verticals. Together, we have ventured into realms where success knows no bounds, and the rewards reaped have surpassed even the wildest dreams.
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