New Tax Regime Vs Old Tax Regime: In the general budget to be presented on February 1, people will be waiting for the announcements related to income tax. If reports are to be believed, in this budget, some relief can be given in income tax for people with an annual income of up to Rs 15 lakh. Let us know what are the current income tax rates and slabs under the New Tax Regime and Old Tax Regime.
Current tax slabs under the new tax regime for the financial year 2024-25
The new tax regime introduced in Budget 2020 offers lower tax rates with fewer exemptions and deductions.
For income up to Rs 3,00,000: Nil
For income from Rs 3,00,001 to Rs 7,00,000: 5%
For income from Rs 7,00,001 to Rs 10,00,000: 10%
For income from Rs 10,00,001 to Rs 12,00,000: 15%
For income from Rs 12,00,001 to Rs 15,00,000: 20%
For income above Rs 15,00,000: 30%
This is the default tax regime. Under this regime, taxpayers can opt for lower rates but will have to forgo exemptions like HRA, LTA, and deductions under sections 80C, 80D, and others.
The standard deduction limit increased to Rs 75,000
However, taxpayers can avail standard deduction. In Budget 2024-25, the limit of standard deduction for salaried employees was increased to Rs 75,000. At the same time, it was increased to Rs 25,000 for family pensioners.
Current tax slabs under the old tax regime (for financial 2024-25)
The old tax regime, while retaining higher rates, allows taxpayers to claim various exemptions and deductions.
For income up to Rs 2,50,000: Nil
For income from Rs 2,50,001 to Rs 7,00,000: 5%
For income from Rs 7,00,001 to Rs 10,00,000: 10%
For income from Rs 10,00,001 to Rs 12,00,000: 15%
For income from Rs 12,00,001 to Rs 15,00,000: 20%
For income above Rs 15,00,000: 30%
For senior citizens in the age group of 60-80 years, the basic exemption limit is Rs 3,00,000. Whereas for super senior citizens i.e. above 80 years, it is Rs 5,00,000.
The old tax regime allows tax deductions under various sections, such as:
Under section 80C, you can save tax on an amount of up to Rs 1.5 lakh through investments like PPF, ELSS, and LIC premiums.
Exemption on health insurance premium under section 80D
Under section 24(b), a deduction of up to Rs 2,00,000 can be claimed on interest paid on the home loan.
Other exemptions like HRA and LTA
How to choose the right tax regime
Choosing which of the new and old tax regimes will be beneficial for you depends on your financial profile. The new tax regime is more suitable for those who invest very little. On the contrary, the old tax regime is suitable for those taxpayers who know how to make maximum use of the exemptions and deductions available on their investments by investing wisely.
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