Tax Slabs: Confusion over new and old tax regime! Know the answers to mind boggling questions on income tax – new vs old tax regime which is more beneficial know all about income tax related questions for salaried class

old tax regime vs new tax regime

The Central Government has made a provision to promote the new tax regime in the budget presented for the upcoming financial year 2023-24. To make it attractive, the limit of tax rebate was increased to Rs 2 lakh by giving the gift of standard deduction, then the old regime was left as it was. In such a situation, the question arises whether the new tax regime with new provisions will really help the taxpayers to save money? The question is also whether every salaried taxpayer should now withdraw himself from the old tax system? There cannot be a simple answer to this as the amount of investment under the old tax regime ranging from 80C to various provisions of the Income Tax Act will decide whether the new tax regime is appropriate for a particular taxpayer or the old one. It is necessary that the more the provisions of the Income Tax Act giving tax exemption are used to the maximum extent, the more beneficial the old tax regime will be in comparison to the new tax regime. For example, if a taxpayer uses a significant portion of his income in Tax Saver Investments options, then he has the advantage of choosing the old tax regime. But for the person who does not have much money left for investment, the new tax system will prove to be beneficial for him.

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Government is waiving double tax under 87A in the new tax regime

If the annual income of a salaried person is up to Rs 7.50 lakh, then in the new tax regime, he will not have to pay income tax of even a single rupee. But in the old tax system, he will have to show an investment of Rs 1.50 lakh to make the income tax zero. Generally, it is not easy for a person with an annual salary of Rs 7.50 lakh to invest Rs 1.50 lakh in a year. In this case, the less amount you invest below Rs 1.50 lakh, the more tax you will have to pay. But if you choose the new tax regime, then without investing a single rupee, the annual income of Rs 7.50 lakh becomes completely tax free. In fact, under Section 87A of the Income Tax Act, Rs 12,500,000 is being taxed in the old tax regime from Rs 2.5 lakh to Rs 5 lakh. Similarly, now in the new tax regime also, the government will waive off the tax of Rs 25,000 on income from Rs 3 lakh to Rs 7 lakh.

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Understand the fund of new-old tax regime

Finance Minister’s statement caused confusion, now understand clearly

Finance Minister Nirmala Sitharaman had said during the budget speech that in the new tax regime, the annual (taxable) income of Rs 9 lakh will now have to pay only Rs 45,000 tax, which is Rs 15,000 as against Rs 60,000 in the old tax regime. Rs is less. Similarly, an annual (taxable) income of Rs 15 lakh will now attract tax of Rs 1.50 lakh as against Rs 1,87,500. That is, a saving of Rs 37,500. Sitharaman also said that those with an annual income of Rs 15.50 lakh or more will get a benefit of Rs 52,500. They will be in such a way that those with annual (taxable) income of more than 15 lakhs will come in the 30 percent tax slab. In this way, Rs 15,000 will become his tax on Rs 50,000. But the government has given a standard deduction of Rs 50,000, so the taxable income of those with an annual income of Rs 15.50 lakh reduces to Rs 15 lakh and they save tax of Rs 15,000. In this way, in the new tax regime, Rs 37,500 will be saved on Rs 15 lakh and Rs 15,000 on Rs 50,000 i.e. a total of Rs 52,500.

Understand income tax fund

Let us now take a look at the slabs of the old and new tax regimes…

Old Tax Regime – (For those below 60 years of age)

growth budget
New Tax Regime (for all age groups)

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Those with an annual salary of up to Rs 7.50 lakh are fine.

Everyone will get standard deduction in the new regime

Standard deduction of Rs 50,000 thousand has been given in both the tax regimes, so those people who choose the old tax regime whose taxable annual income is more than Rs 5.50 lakh, their income up to Rs 3.50 lakh is tax free. At the same time, in the new tax regime from the new financial year 2023-24, those with a total annual income of up to Rs 7.50 lakh will be tax free, while those with a total annual income of more than Rs 7.50 lakh will be tax free of Rs 3.50 lakh. Will go It has two meanings-

1. In the new tax regime, those who get a salary of up to Rs 7.50 lakh in a year will be tax free, while in the old tax regime, only those who get a salary of up to Rs 5.50 lakh in a year will be tax free and if someone’s annual salary is more than 5.50 lakh, then they The rest of the amount will have to be invested in tax-saving investment options.

2. Tax is saved on investing in the old tax regime, but if the taxable income is more than Rs 5 lakh, more tax will have to be paid as compared to the new tax regime. That is, in the old tax regime, some tax exemption is available on various pension schemes, insurance schemes, tax saver mutual funds premium, mediclaim premium, children’s school fees etc., but the tax rates are high. At the same time, the tax rates are lower in the new tax regime.

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So what to do – go to the new or stay in the old?

In the end, the same Yaksha question – benefit in the new tax regime or is the old tax system correct? The answer depends on your financial circumstances. If you make maximum use of the various tax saving tools of the Income Tax Act, then definitely you should stay in the old tax regime, but if you are unable to save a lot from your salary and invest in tax saving schemes, then Coming to the new tax system will be beneficial. It would be better to calculate both the tax regimes according to your income and investments or take the help of an expert.