New vs old income tax regimes: Which one offers more benefits and savings?

The Union Budget 2024 brought significant changes to the income tax framework in India. With updates to the new tax regime, taxpayers now face an important decision: which regime to opt for?

Following the latest budget announcements, let’s explore the key differences between the two regimes and analyze which might be more beneficial for different types of taxpayers.

New tax regime

The new income tax regime maintains the basic exemption limit at ₹3 lakh, indicating that income below this threshold is not subject to tax. The revised tax slabs are as follows:

For individuals with an income between ₹3 lakh and ₹7 lakh, the tax rate is 5%. And for those earning between ₹7 lakh and ₹10 lakh, the tax rate is 10%. Income between ₹10 lakh and ₹12 lakh are taxed at 15%, while incomes between ₹12 lakh and ₹15 lakh are taxed at 20%. And for individuals whose income exceeds ₹15 lakh, the tax rate is 30%.

The standard deduction for salaried individuals has been raised to ₹75,000 from ₹50,000, thereby leading to a reduction of taxable income for salaried individuals.

Old tax regime

In contrast to the new tax regime, the old income tax regime continues to allow several deductions under sections such as HRA, 80C investments, medical insurance premiums, education loan interest, and charitable donations.

Factors to consider while choosing between the regimes:

Choosing between the old and new tax regimes depends on individual financial situations. Taxpayers must asses their income, investments and potential deductions to determine the most beneficial option.

• Savings vs Simplicity: While the new regime is simpler and allows for fewer deductions, individuals who did not take advantage of all the deductions available under the old regime may benefit more from it.

• Deductions and Investments: Opting for the old regime might lead to lower taxes if you are currently benefiting from deductions like HRAs and 80C investments or have substantial medical or education expenses.