Choosing between the old and new tax slabs

Manish is 33 years old. And works with an IT company. As part of the annual appraisal, his salary has been revised to Rs 8 lakh per annum. And is now wondering whether opting for the new tax slabs would be more beneficial to him or if he should continue with the existing taxation regime. See the table 'Tax slabs: old and new'. The salaried can choose either of the two systems, and even switch between them from one financial year to the next. However, businesspersons can choose their tax slabs only once. After they have done so, they must continue with them. In the existing (old) taxation system, one can claim a variety of deductions and exemptions. On the other hand, the new tax slabs are simplified. They have no deductions or exemptions, except for a few miscellaneous ones such as deduction for agricultural income and leave encashment on retirement. However, they also have lower tax rates. Here is what Manish will have to pay in tax under the existing tax system and under the new one. Existing tax slabs: The existing taxation system allows many deductions and exemptions that can lower your taxable income. Manish has the following: Standard deduction: A deduction of flat Rs 50,000 is allowed for all the salaried and pensio

This article was originally published on January 15, 2021.