Old Tax Regime vs New Tax Regime

The new tax regime has widened the scope of taxation with seven tax slab rates ranging from 0% to 30% with the highest tax rate applicable on income above INR 15 lakh. Contrary to the new regime, there were fThe new tax regime is much wider in scope with five tax slab rates ranging from 0% to 30%, with the lowest starting with INR 3 lakh. Under the old system, income up to INR 2.5 lakh is exempt from personal income tax with the maximum rate applicable on income above INR 10 lakh which is 30%.

Here’s how applicable tax rates under both the regimes work:

Notes:

1. If total income includes any income chargeable by way of capital gain u/s 111A, 112 and 112A of the Act or dividend income, the rate of surcharge on income tax (if applicable) on such part of income shall not exceed 15%.
2. For person whose income chargeable to tax u/s 1A of 115BAC, and where total income excluding the dividend or chargeable by way of capital gain u/s 111A, 112 and 112A of the Act exceeding 2 crores, surcharge would be restricted to 25%.

Exemptions and deductions not claimable under the new tax regime

The following are some of the major deductions and exemptions you cannot claim under the new tax system:

1. The standard deduction under Section 80TTA/80TTB
2. Professional tax and entertainment allowance on salaries
3. Leave Travel Allowance (LTA)
4. House Rent Allowance (HRA)
5. Minor child income allowance
6. Helper allowance
7. Children education allowance
8. Other special allowances [Section 10(14)]
9. Interest on housing loan on the self-occupied property or vacant property (Section 24)
10. Chapter VI-A deduction (Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA)
11. Exemption or deduction for any other perquisites or allowances including food allowance of Rs 50/meal subject to 2 meals a day
12. Employee’s (own) contribution to NPS
13. Donation to Political party/trust, etc
14. Budget 2023 update –Deduction from family pension income only for years up to FY 2022-23 (From FY 2023-24, this is allowed as deduction)
15. Budget 2023 update –Standard deduction of Rs.50,000 only for years up to FY 2022-23 (From FY 2023-24, this is allowed as deduction)

Exemptions and deductions available under the new regime?

You can claim tax exemption for:

1. Transport allowances in case of a specially-abled person.
2. Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
3. Any compensation received to meet the cost of travel on tour or transfer.
4. Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
5. Perquisites for official purposes.
6. Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA).
7. Interest on Home Loan on let-out property (Section 24)
8. Gifts up to Rs 5,000
9. Deduction for employer’s contribution to NPS account (Section 80CCD(2)).
10. Deduction for additional employee cost (Section 80JJA).

Who can opt to be taxed under Old Regime?

Any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime. For those person having income under the head “profit and gains of business or profession” and having opted for old regime can revoke that option only once and after that they will continue to be taxed under the new regime. For those not having income under the head “profit and gains of business or profession”, option for old regime may be exercised in each year