Understanding India’s NEW VS OLD TAX REGIME: A Complete Breakdown for Taxpayers
Choosing between these two NEW vs. OLD TAX regimes largely hinges on an individual’s financial circumstances and tax planning strategy. For example, individuals with significant investments in qualifying instruments and those who claim various deductions may benefit more from the Old Tax Regime. Conversely, those with simpler financial portfolios or lower income levels may find the New Tax Regime advantageous
NEW vs. OLD TAX REGIME TABLE
| Net Income | Home Loan | New Tax Regime | Old Tax Regime | Amount of Tax | Which is Better? |
|---|---|---|---|---|---|
| 8 Lakhs | YES | 23,400 | – | – | Old Regime |
| 8 Lakhs | NO | 23,400 | – | – | Old Regime |
| 9 Lakhs | YES | 33,800 | – | – | Old Regime |
| 9 Lakhs | NO | 33,800 | 33,800 | Neutral | |
| 11 Lakhs | YES | 55,900 | 33,800 | Old Regime | |
| 11 Lakhs | NO | 55,900 | 75,400 | New Regime | |
| 13 Lakhs | YES | 88,400 | 75,400 | Old Regime | |
| 13 Lakhs | NO | 88,400 | 117,000 | New Regime | |
| 15 Lakhs | YES | 1,30,000 | 117,000 | Old Regime | |
| 15 Lakhs | NO | 1,30,000 | 179,400 | New Regime | |
| 17 Lakhs | YES | 184,600 | 179,400 | Old Regime | |
| 17 Lakhs | NO | 184,600 | 241,800 | New Regime | |
| 19 Lakhs | YES | 2,47,000 | 241,800 | Old Regime | |
| 19 Lakhs | NO | 247,000 | 304,200 | New Regime | |
| 21 Lakhs | YES | 3,09,400 | 304,200 | Old Regime | |
| 21 Lakhs | NO | 309,400 | 3,66,600 | New Regime | |
| 23 Lakhs | YES | 371,800 | 366,600 | Old Regime | |
| 23 Lakhs | NO | 371,800 | 429,000 | New Regime |
Assumptions:
- Deduction Old Regime: 80C = 1.5 Lakh + NPS = 50K + 80D = 50K + STD DED = 50K
- Deduction New Regime: STD DEDUCTION = 75K
- Home Loan: 2 Lakh
- Capital Gain / HRA/LTA/Other Deduction: Not Considered
The introduction of the new tax regime has left many Indian taxpayers puzzled about which option would serve them better. Let’s dive into a detailed analysis that will help you make an informed decision about your tax planning strategy.
The Key Differences at a Glance
The image presents a comprehensive comparison between the old and new tax regimes across various income brackets (from 8 lakhs to 23 lakhs), taking into account an important factor that many analyses miss—home loan status. This comparison reveals some fascinating patterns that every taxpayer should know about.
Breaking Down the Assumptions
Before we dive into the analysis, let’s understand the baseline assumptions:
Under the old regime, deductions include Section 80C (1.5 lakhs), NPS (50k), 80D (50k), and standard deduction (50k)
The new regime offers a standard deduction of RS 75,000.
Home loan interest deduction is considered at 2 lakhs
Capital gains, HRA, LTA, and other deductions are not considered in this analysis
Key Findings from the Comparison
1. Income Level Impact
For those earning 8 lakhs annually, the old regime proves more beneficial regardless of home loan status. The tax liability stands at 23,400 under the new regime, while the old regime offers better benefits.
2. The Home Loan Factor
Having a home loan significantly influences which regime works better. For instance, at 11 lakhs income:
With home loan: New regime (₹55,900) vs Old regime (₹75,400)
Without a home loan: Old regime proves more beneficial
3. Higher Income Brackets
For taxpayers in the 15-23 lakhs bracket, the choice becomes more nuanced:
At 15 lakhs: New regime shows advantage for non-home loan holders
At 23 lakhs: New regime becomes favorable for both categories, with tax at ₹3,71,800 compared to the old regime’s higher amounts
Making Your Choice
The blog post suggests making your decision based on:
1. Your current income bracket
2. Whether you have a home loan
3. Your ability to make investments and claim deductions under the old regime
Conclusion
While the new tax regime might seem simpler with fewer deductions to track, it’s not a one-size-fits-all solution. Your personal financial situation, especially regarding home loans and other investments, should guide your choice between the two regimes. Consider consulting with a tax professional to make the most informed decision based on your specific circumstances.
Remember: This analysis assumes specific deduction amounts and doesn’t consider all possible tax-saving instruments. Your actual tax liability might vary based on your unique financial situation and available deductions.
