As it seems evident, gradually the ‘Old Regime’ for computing income tax is being phased out, from FY:24-25, each tax payer has been placed in the ‘New Regime’ for taxation. However, currently, one may opt out and move to the ‘Old Regime’.
In the taxation slabs under the regimes, the new regime is definitely more attractive, however, in the old regime, it offers more exemption / deductions that may substantially reduce the taxable income. Based on the income and after evaluating the eligible relief, one may opt the regime that has a lower tax impact.
Tax Slabs under New & Old Regimes
| Taxable Income Slab | New Regime | Old Regime |
| ₹0 – ₹2,50,000 | – | – |
| ₹2,50,000 – ₹3,00,000 | – | 5% |
| ₹3,00,000 – ₹5,00,000 | 5% | 5% |
| ₹5,00,000 – ₹7,00,000 | 5% | 20% |
| ₹7,00,000 – ₹10,00,000 | 10% | 20% |
| ₹10,00,000 – ₹12,00,000 | 15% | 30% |
| ₹12,00,000 – ₹15,00,000 | 20% | 30% |
| >₹15,00,000 | 30% | 30% |
Tax Comparison under different conditions
For FY: 2024-25 (AY: 2025-26) under the New Regime, Standard Deduction is ₹ 75,000/- while in the Old Regime it is ₹ 50,000/-.
In the comparative examples has different income values and a few common eligible exemptions & deductions. Depending on the cumulative relief under the old regime, one need to evaluate which is more beneficial.
Case#1: Salary Income is ₹ 12.00 lakhs
New Regime | Old Regime | |
| Gross Salary Income | 12,00,000 | 12,00,000 |
| Less: Exemptions u/s 10 | 40,000 | |
| Net Salary Income | 12,00,000 | 11,60,000 |
| Deductions u/s 16 | 75,000 | 52,500 |
| Tax on Employment u/s 16(iii) | 2,500 | |
| Standard Deduction u/s 16(1a) | 75,000 | 50,000 |
| Exemptions / Deductions | 0 | 1,25,000 |
| Interest on Home Loan – u/s 24 | 50,000 | |
| Chapter VIA (Sections 80C, 80D, etc.) | 75,000 | |
| Taxable Income | 11,25,000 | 9,82,500 |
| Income Tax (as per slab) | 68,750 | 1,09,000 |
| Less: Rebate u/s 87A | ||
| Net Income Tax (after Rebate) | 68,750 | 1,09,000 |
| Education Cess @ 4% | 2,750 | 4,360 |
| Surcharge | ||
| Total Tax Amount (incl Cess & Surcharge) | 71,500 | 1,13,360 |
Case#2: Salary Income is ₹ 18.00 lakhs
New Regime | Old Regime | |
| Gross Salary Income | 18,00,000 | 18,00,000 |
| Less: Exemptions u/s 10 | 1,25,000 | |
| Net Salary Income | 18,00,000 | 16,75,000 |
| Deductions u/s 16 | 75,000 | 52,500 |
| Tax on Employment u/s 16(iii) | 2,500 | |
| Standard Deduction u/s 16(1a) | 75,000 | 50,000 |
| Exemptions / Deductions | 0 | 3,75,000 |
| Interest on Home Loan – u/s 24 | 2,00,000 | |
| Chapter VIA (Sections 80C, 80D, etc.) | 1,75,000 | |
| Taxable Income | 17,25,000 | 12,47,500 |
| Income Tax (as per slab) | 2,07,500 | 1,86,750 |
| Less: Rebate u/s 87A | ||
| Net Income Tax (after Rebate) | 2,07,500 | 1,86,750 |
| Education Cess @ 4% | 8,300 | 7,470 |
| Surcharge | ||
| Total Tax Amount (incl Cess & Surcharge) | 2,15,800 | 1,94,220 |
Case#3: Salary Income is ₹ 30.00 lakhs
New Regime | Old Regime | |
| Gross Salary Income | 30,00,000 | 30,00,000 |
| Less: Exemptions u/s 10 | 1,50,000 | |
| Net Salary Income | 30,00,000 | 28,50,000 |
| Deductions u/s 16 | 75,000 | 52,500 |
| Tax on Employment u/s 16(iii) | 2,500 | |
| Standard Deduction u/s 16(1a) | 75,000 | 50,000 |
| Exemptions / Deductions | 0 | 3,25,000 |
| Interest on Home Loan – u/s 24 | 1,50,000 | |
| Chapter VIA (Sections 80C, 80D, etc.) | 1,75,000 | |
| Taxable Income | 29,25,000 | 24,72,500 |
| Income Tax (as per slab) | 5,67,500 | 5,54,250 |
| Less: Rebate u/s 87A | ||
| Net Income Tax (after Rebate) | 5,67,500 | 5,54,250 |
| Education Cess @ 4% | 22,700 | 22,170 |
| Surcharge | ||
| Total Tax Amount (incl Cess & Surcharge) | 5,90,200 | 5,76,420 |
Case#4: Salary Income is ₹ 45.00 lakhs
New Regime | Old Regime | |
| Gross Salary Income | 45,00,000 | 45,00,000 |
| Less: Exemptions u/s 10 | 2,00,000 | |
| Net Salary Income | 45,00,000 | 43,00,000 |
| Deductions u/s 16 | 75,000 | 52,500 |
| Tax on Employment u/s 16(iii) | 2,500 | |
| Standard Deduction u/s 16(1a) | 75,000 | 50,000 |
| Exemptions / Deductions | 0 | 3,75,000 |
| Interest on Home Loan – u/s 24 | 2,00,000 | |
| Chapter VIA (Sections 80C, 80D, etc.) | 1,75,000 | |
| Taxable Income | 44,25,000 | 38,72,500 |
| Income Tax (as per slab) | 10,17,500 | 9,74,250 |
| Less: Rebate u/s 87A | ||
| Net Income Tax (after Rebate) | 10,17,500 | 9,74,250 |
| Education Cess @ 4% | 40,700 | 38,970 |
| Surcharge | ||
| Total Tax Amount (incl Cess & Surcharge) | 10,58,200 | 10,13,220 |
Note:
The above examples are just indicative based on the most common exemption / deductions. There are quite a few exceptions under both the regimes that should be considered.
Well drafted for clear understanding