Confused between old and new tax regime? Here's the ultimate guide

April 1 marks the beginning of a new financial year. This also happens to be the time when you would be receiving a reminder from the accounts department of your company, asking you to declare your investments and which tax regime you want to opt for. If you are a salaried individual, you have two options: old tax regime and new tax regime. Choosing which to opt for is crucial since the TDS (tax deductible at source) is calculated accordingly, determining your in-hand salary. So, let's look at which tax regime you should opt for. Below is a breakdown of the income tax slabs under the old and new tax regimes, along with fundamental differences between the two. A primer While the old tax regime has fewer tax slabs, the new tax regime has lower tax rates corresponding to each income group. Further, the tax exemption limit under the new regime has been increased to Rs 3 lakh, whereas it is Rs 2.5 lakh in the old regime. Here's a table showing the differences in income tax slab rates between the two regimes. Tax slabs: Old vs new tax regime The new regime has more tax slabs compared to the old one Old tax regime Income (Rs) Tax rate (%) Up to 2.5 lakh Nil 2.5 to 5 lakh 5 5 to 10 lakh 20 Above 10 lakh 30 New tax regime  Income (Rs) Tax rate (%) Up to 3 lakh Nil 3 to 6 lakh 5 6 to 9 lakh 10 9 to 12 lakh 15 12 to 15 lakh 20 Above 15 lakh 30 Note: Applicable for resident Indians under 60 years of age.  As you can see from the above table, the new tax regime offers lower tax rates corresponding to each income group. However, this comes at the cost of foregoing several deductions and exemptions available under the old regime, including house rent allowance (HRA), interest on home loan, Section 80C and 80D

This article was originally published on April 03, 2024.