Income Tax Calculations: First know your tax in the new and old regime, then choose the right regime

Income Tax old regime Vs New regime: The new regime has lower tax rates, but most deductions are not available. This regime is suitable for those who do not make tax-saving investments. If you do not take full advantage of the deductions available under Section 80C, Section 80D and Section 24B of Income Tax, then the new regime of Income Tax may not be beneficial for you.

Many taxpayers are confused about the new and old regime of income tax. The government has made the new regime of income tax the default regime. This means that if a person working does not tell his employer’s finance department that he wants to use the old regime, then it will be assumed that the new regime is his choice. The biggest difference between the new regime and the old regime is in terms of deductions and tax slabs. Let us know about this in detail.

For whom is the new regime beneficial?

The tax rates are low in the new regime, but the benefit of most deductions is not available. This regime is right for those who do not make tax-saving investments. If you do not take full advantage of the deductions available under Section 80C, Section 80D and Section 24B of Income Tax, then the new regime of income tax is beneficial for you. Tax calculation is also easy in this. There is no tax on income up to Rs 4 lakh.

What are the tax rates in the new regime?

In the new regime, the tax on income of Rs 4 to 8 lakh is 5%. The tax on income of Rs 8 to 12 lakh is 10%. The tax on income of Rs 12 to 16 lakh is 15%. The tax on income of Rs 16 to 20 lakh is 20%. The tax on income of Rs 20 to 24 lakh is 25%. The tax on income above Rs 24 lakh is 30%.

How many types of deductions are available in the new regime?

The standard deduction in the new regime is Rs 75,000. Secondly, if the employer contributes to the employee’s NPS account, then deduction is available on that. It has to be kept in mind that both these deductions are available to employed people. If a person does not do a job, then he will not get the benefit of both these deductions. This makes it clear that the new regime is beneficial for employed people.

Will there be no tax on income up to Rs 12 lakh in the new regime?

In the budget presented on February 1, 2025, the government has made income up to Rs 12 lakh per annum tax-free. This will benefit only taxpayers using the new regime. If a person is employed, it means that he will not have to pay any tax on income up to Rs 12.75 lakh. Experts say that since the government has not made any changes in the tax slabs and deductions of the old regime of income tax in the last several years, the new regime has now become more attractive.

Do taxpayers use the old regime only for deductions?

Most individual taxpayers use the old regime only to avail deductions. Taxpayers are especially interested in taking advantage of Section 8C, Section 80D, Section 24B and HRA. But, a lot of documents have to be submitted for this. Apart from this, a person is forced to invest only in those investment options which offer deductions. Due to this, he is not able to take advantage of the investment opportunity with high returns.

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