The Union Budget 2023 has left individuals confused with the choice of the tax regime. Both old and new tax regimes require a proper assessment before choosing one. The calculation of tax payable by various income groups under the new tax regime and old tax regime is shown at the bottom of this post so that you can gauge the impact of both tax structures on your income.
The Union Budget 2020 introduced a new personal income tax regime for individual taxpayers. According to the newly introduced tax law salaried individuals, who have no business income, will have to choose between the existing and new tax regimes every financial year, at their convenience. This option of choosing the old tax regime or a new tax regime can be changed every FY irrespective of the option given earlier.
Before listing out the new slabs in the budget 2023, the finance minister announced that the Old Tax Regime will only be available on request now, and what was known as the New Tax Regime so far will thus be considered the default regime. The taxpayers can choose the regime while filing income tax returns.
Advantages of tax structure under new tax regime:
This time the Government offers certain concessions to those who opt for the new tax regime. In the Union Budget 2023, Finance Minister Nirmala Sitharaman announced that the rebate under Section 87A will be hiked from Rs.5 Lakh to Rs.7 Lakh under the new tax regime. It means a tax rebate of Rs 25,000 under section 87A is available under the new tax regime (applicable for FY 2023-24) and persons in the new tax regime, with income up to Rs.7 Lakh will not have to pay any tax. The Standard deduction of Rs 50,000 to salaried individuals/pensioners and deduction from family pensions up to Rs.15000, is earlier allowed only under the old regime. It is now proposed to allow these two deductions under the new regime also.
The new income tax rates are lower compared to the old tax rate. However, anyone opting for the new tax regime for FY 2023-24 will have to forego most of the deductions and reliefs available under the old tax regime such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), Conveyance, Daily expenses in the course of employment, Relocation allowance, Helper allowance, Children education allowance, Other special allowances [Section 10(14)], Professional tax, Interest on housing loan (Section 24), Chapter VI-A deduction (80C,80D, 80E,80EEA,80EEB,80 TTA, 80TTB, etc.).
Income Tax slabs for FY 2023-24(AY-2024-25) under the new tax regime are as under.
Under the new tax regime slab rates are not differentiated based on age group. If your income is beyond Rs.7 lakh per annum after standard deduction, your slab-wise tax liability will be as below.
| Income tax slab for individuals | Income tax rate |
| Up to Rs.3,00,000 | NIL |
| From Rs.3,00,000 to Rs.6,00,000 | 5% of the amount by which the taxable income exceeds Rs. 300000-. |
| From Rs.6,00,001 to Rs.9,00,000 | 10% [Rs. 15000/- + 10% of the amount by which the taxable income exceeds Rs. 6,00,000/-] |
| From Rs.9,00,000 to Rs.12,00,000 | 15% [Rs.45000+15% of the amount by which the taxable income exceeds Rs. 9,00,000/-] |
| From Rs.12,00,000 to 15,00,000 | 20%[ 900000+ 20% of the amount by which the taxable income exceeds Rs. 12,00,000/-] |
| Above Rs.15,00,000 | 30% [1,50,000+30% of the amount by which the taxable income exceeds Rs. 15,00,000/-] |
Note: In addition to the applicable tax stated above, the Education Cess of 4% of the total Income Tax payable by all taxpayers.
Surcharge: 10% of the Income Tax is payable where taxable income is more than Rs. 1 crore.
Advantages of the old tax regime:
Under the old tax regime, individuals with an income up to Rs.5 Lakh will not have to pay any tax. Deductions of Rs.50000 to salaried individuals, and deductions from family pensions up to Rs.15000, are allowed as Standard deductions. Besides, there are many other deductions and rebates available on income under the old tax regime such as Leave Travel Allowance (LTA), House Rent Allowance (HRA) [If you do not know how to claim benefit on HRA received (Click HRA), Conveyance, Daily expenses in the course of employment, Relocation allowance, Helper allowance, Children education allowance, Other special allowances [Section 10(14)], Professional tax, Interest on housing loan (Section 24), Chapter VI-A deduction (80C, 80D, 80E, 80EEA, 80EEB, 80 TTA, 80TTB, etc.). The maximum deductions that you can claim under sections 80C to 80U are listed in the following post. To know click ‘Eligible Rebate and Deductions’.
Income Tax slabs for FY 2023-24(AY-2024-25) under the old tax regime are as under.
Under the old tax regime slab rates are differentiated based on the age group of the assessed. If your age is below 60 years and your income is beyond Rs.5 lakh per annum after all deductions and rebates, your slab-wise tax liability will be as below.
| Income tax slab for individuals below 60 years (Born on or after 01.04.1964) | Income tax rate |
| Up to Rs.2,50,000 | NIL |
| From Rs.2,50,001 to Rs.5,00,000 | 10% of the amount by which the taxable income exceeds Rs. 2, 50,000/-.-) |
| From Rs.5,00,001 to Rs.10,00,000 | 20% [Rs. 25,000/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-] |
| Above Rs.10,00,000 | 30% [ Rs. 125,000/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-] |
Note: In addition to the applicable tax stated above, the Education Cess of 4% of the total Income Tax payable by all taxpayers.
Surcharge: 10% of the Income Tax is payable where taxable income is more than Rs. 1 crore.
For Senior Citizen
Under the old tax regime slab rates are differentiated based on the age group of the assessed. In case your taxable income is Rs.5 lakh or below, you need not pay tax. If you are a senior citizen and your income is over Rs.5 lakh per annum after all deductions and rebates, your slab-wise tax liability will be as below.
| Income tax slab for individuals above 60 years (Born on or before 31.03.1964) | Income tax rate |
| Up to Rs.3,00,000 | NIL |
| From Rs.3,00,001 to Rs.5,00,000 | 10% of the amount by which the taxable income exceeds Rs.3,,00000] |
| From Rs.5,00,001 to Rs.10,00,000 | 20% [Tax payable: Rs. 20,000/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-.] |
| Above Rs.10,00,000 | 30% [Tax Payable: Rs.120, 000/- + 30% of the amount by which the taxable income exceeds Rs. 10, 00,000/-. |
Note: In addition to the applicable tax stated above, the Education Cess of 4% of the total Income Tax payable by all taxpayers.
Surcharge: 10% of the Income Tax is payable where taxable income is more than Rs. 1 crore.
For Super Senior Citizens
Under the old tax regime slab rates are differentiated based on the age group of the assessed. If your age is 80 years and above (super senior citizen), and your income is beyond Rs.5 lakh per annum after all deductions and rebates, your slab-wise tax liability will be as below.
| Income tax slab for individuals of above 80 years (Born on or before 31.03.1944) | Income tax rate* (applicable if net taxable income exceeds Rs.5 lakh) |
| Up to Rs.5,00,000 | NIL |
| From Rs.5,00,001 to Rs.10,00,000 | 20% [Tax payable 20% of the amount by which the taxable income exceeds Rs. 5, 00,000/-.] |
| Above Rs.10,00,000 | (Rs.100000+30% of the amount by which the taxable income exceeds Rs. 10, 00,000/- |
Note: In addition to the applicable tax stated above, the Education Cess of 4% of the total Income Tax payable by all taxpayers.
Surcharge: 10% of the Income Tax is payable where taxable income is more than Rs. 1 crore.
Let us know to compare the tax payable under the old regime and the new regime.
The first step is to arrive at your estimated gross income (Salary/Pension+ Other Income) for the FY 2023-24. The following income tax deductions are still available both in the old tax regime and the new tax regime:
- Standard deduction of Rs.50000 (Fifty thousand)to salaried individuals, and deduction from family pension up to Rs.15000 (Fifteen thousand), allowed.
- Death-cum-retirement benefit,
- Commutated value of pensions,
- Amount received on VRS up to Rs 5 lakh,
- Employee Provident Fund money,
- Money received as scholarship for education,
- Cash received as awards constituted in the public interest,
- Short-term withdrawals and maturity amounts from the National Pension Scheme,
- The leave encashment is up to 10 months average salary for non-government employees is exempt up to Rs.25 lakhs. This limit was 3 lakhs since 2002.
Deduct standard deductions and other income from the above sources if any from your estimated gross income before assessing your tax liability.
Now from the below chart, you find which regime suits you better.
| Income in Rupees (After claiming various relief and deductions mentioned above). | Tax payable under the OLD TAX REGIME by an individual of below 60 years | Tax payable under the NEW TAX REGIME |
| 5 lakh | 0 (after rebate u/s 87A) | 0 (after rebate u/s 87A) |
| 6 lakh | 45000 | 0(after rebate u/s 87A) |
| 7 lakh | 65000 | 0 (after rebate u/s 87A) |
| 8 lakh | 85000 | 35000 |
| 9 lakh | 105000 | 45000 |
| 10 lakh | 125000 | 60000 |
| 11 lakh | 155000 | 75000 |
| 12 lakh | 185000 | 90000 |
| 13 lakh | 215000 | 110000 |
| 14 lakh | 245000 | 130000 |
| 15 lakh | 275000 | 150000 |
| 16 lakh | 305000 | 180000 |
| 17 lakh | 335000 | 210000 |
| 18 lakh | 365000 | 240000 |
| 19 lakh | 395000 | 270000 |
| 20 lakh | 425000 | 300000 |
Note: In addition to the applicable tax stated above, an Education Cess of 4% of the total Income Tax is payable by all taxpayers.
Surcharge: 10% of the Income Tax is payable where taxable income is more than Rs. 1 crore.
Conclusion: The above chart helps you to choose which Tax regime is most suitable for you in the FY 2023-24 (AY 204-25), based on your annual income and total deductions. If your net income after all the deductions is less or equal to Rs. 5 lakh you have to go for the old scheme. For example, your gross income is Rs.8 lakh and deductions u/s 80 C, relief on house rent paid, health insurance premium paid (80D), rebate on interest received on deposit (80 TTB or 80 TTA), professional tax paid, standard deductions, etc. amounts to Rs.3 lakh then your net taxable income becomes Rs.5 lakh. In this case, you need not pay any income tax.
If your taxable income is beyond Rs.5 lakh even after all deductions and rebates, you will have to go for the new tax regime.
