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5 min 03 Aug 2023

Highlights:
Comparison of Di"erent Slabs: Old Tax Regime
vs New Tax Regime
Impact of Old vs New Tax Regime Slabs
Old Tax Regime or New Tax Regime: Which
Scheme is More Beneficial

The Government of India levies income tax on

individual taxpayers as per their income levels. After
decades of paying taxes a certain way, a new tax
regime was announced in the financial year 2020-21
to simplify taxes and reduce the burden of
compliance on taxpayers. It comprised lower tax
rates along with a decrease in tax-saving
opportunities like claiming deductions and
exemptions under the Income Tax Act.

Two years on, the acceptability for this new tax

system among taxpayers has been low. The revisions
introduced in the 2023 budget aim to encourage a
better response. These changes come into e"ect
from FY 2023-24 beginning in April 2023. The new
tax regime has now been selected as the default
option for all taxpayers. Anyone who wishes to
continue with the old tax regime will have to specify
this preference hereon.

Comparison of Di!erent Slabs: Old

Tax Regime vs New Tax Regime
Taxpayers drawing a salary between Rs. 5 lakh to Rs.
10 lakh annually are taxed at 20% under the old
regime. In the new regime, they will be taxed at 10%,
which is half the rate. Also, those with an annual
income of Rs. 7.5 lakh to Rs. 10 lakh need to bear 15%
income tax. However, if taxpayers receive benefits
from the old tax regime exemptions and their net tax
payable is less, they may choose to continue with
the same structure.

Here is a tabulated comparison of the old and new

tax slabs for persons below 60 years old:

Old New
Regime Annual Regime Tax
Tax Slab Income Slab

Nil Up to Rs. 2.5 Nil

lakh

5% Rs. 2.5 lakh to 5%

Rs. 5 lakh

20% Rs. 5 lakh to 10%

Rs. 7.5 lakh

20% Rs. 7.5 lakh to 15%

Rs. 10 lakh

30% Rs. 10 lakh to 20%

Rs. 12.5 lakh

30% Rs. 12.5 lakh to 25%

Rs. 15 lakh

30% Rs. 15 lakh and 30%

above

New Tax Regime

The new tax regime contains six tax slabs with zero
tax payable for income up to Rs. 3 lakh and a tax rate
rise by 5% for progressive income of Rs. 3 lakh each.
The income tax slabs apply to taxable income in
excess of Rs. 7 lakh. This means that you don’t need
to pay any tax if your taxable income is below Rs. 7
lakh.

Tax Calculation Under the New Tax

Regime
Income tax is charged in incremental slabs. So, a
person earning Rs. 10 lakh p.a. will not be charged a
flat 15% rate on their income. Instead, their income
up to Rs. 3 lakh will attract zero tax; while the
income between Rs. 3 lakh to Rs. 6 lakh will be levied
5% (5% of Rs. 3 lakh = Rs. 15,000). The next slab
between Rs. 6 lakh to Rs. 9 lakh will incur 10% tax
(Rs. 30,000) and the remaining Rs. 1 lakh will attract
15% tax (Rs. 15,000) bringing your total tax outgo to
Rs. 60,000.

Exemptions and Deductions in the

New Tax Regime
First of all, let us understand what constitutes
exemptions and deductions. The former implies a
lowered tax burden on certain kinds of income. For
example, taxpayers do not have to pay taxes on
income received through agriculture. Whereas,
deduction pertains to the removal of some
investments and expenditures the taxpayer makes
before calculating the taxable income. So, for
instance, if you pay Rs. 20,000 as your health
insurance premium, you can deduct this amount
from your total income.

The old tax regime contains 120 exemptions, which

may not benefit you and yet add to the confusion
around taxation. Hence, after much deliberation, the
government has removed around 70 of these
exemptions.

Here is a brief list of all the deductions and

exemptions currently available under both regimes:

Exemptions and Deductions in the

Old Tax Regime
The exemptions listed below are not allowed in the
new tax regime:

Leave Travel Allowance

House Rent Allowance

Standard deduction of Rs. 50,000 for all salaried

individuals

Relaxation on entertainment allowance and

professional tax for government employees

Concessions available under Section 80TTA and

TTB on interest from savings account deposits

Tax saving investment deductions under Chapter

VI-A: Sections 80C, 80D, 80E, 80CCC, 80CCD,
80D, 80DD, 80DDB, 80EE, 80EEA, 80EEB, 80G,
80GG, 80GGA, 80GGC, 80IA, 80-IAC, 80-IB, 80-
IBA, etc.

Rs. 15,000 deduction from the family pension

under Section 57(iia)

Tax rebate on the interest amount for Home Loans

in the case of both self-occupied and vacant
properties under Section 24

This excludes deduction under Section 80CCD(2) for

employers’ contribution to National Pension System
(NPS), Section 80JJA for new employment and
more. It must also be noted that if the employee’s
contribution to EPF and NPS exceeds Rs. 7.5 lakh in a
financial year, s/he is liable to pay tax.

Important Exemptions Retained in

the New Tax Regime
Following are some of the exemptions one can still
enjoy under the new tax structure:

Standard concession on rent

Income from Life Insurance

Money received as scholarship for education

Income from agriculture

Voluntary Retirement Scheme proceeds up to Rs.

5 lakh

Retrenchment compensation

Leave encashment on retirement

Death cum retirement benefit, etc.

Impact of Old vs New Tax Regime

Slabs: Calculation Examples
Both the old and new tax regime slabs can impact
your taxes in disparate ways:

For annual salary up to Rs. 7.5 lakh (without

exemption)

Old Old New New

Regime Regime Regime Reg

Income Tax rate Tax Tax rate Tax

tax slab

Up to Rs. 0 0 0 0
2,50,000

Rs. 5% Rs. 5% Rs.

2,50,001 12,500 12,5
to Rs.
5,00,000

Rs. 20% Rs. 10% Rs.

5,00,001 50,000 25,0
to Rs.
7,50,000

Sum Rs. Rs.

total 62,500 37,5

Health 4% Rs. 4% Rs.

and 2,500 1,50
education
cess

Payable Rs. Rs.

tax 65,000 39,0

Annual income of Rs. 7.5 lakh (inclusive of

exemptions)

Amount Per
Particulars of Income Annum

Annual gross salary Rs. 7,50,000

Less: Exemptions under Rs. 1,50,000

Section 80C

Less: Section 80CCD (1B) Rs. 50,000

Less: Section 80D Rs. 50,000

HRA Rs. 10,000

Taxable income Rs. 4,90,000

Old Regime New Regime

Income tax Tax Tax Tax Tax

slab rate rate

Up to Rs. 0 0 0 0
2,50,000

Rs. 5% Rs. 5% Rs.

2,50,001 to 12,500 12,500
Rs.
5,00,000

Rs. 0 0 10% Rs.

5,00,001 to 25,000
Rs.
7,50,000

Rebate Rs.
12,500

Total tax 0 Rs.

37,500

Health and 4% 0 4% Rs.

education 1,500
cess

Tax 0 Rs.
payable 39,000

Old Tax Regime or New Tax Regime:

Which Scheme is More Beneficial
Both systems of taxation have distinct pros and
cons. The merits of the new regime are:

Reduced Taxes
The new regime pro"ers concessional tax rates.
Moreover, since it does not extend most of the
exemptions and deductions, the required
documentation is minimal simplifying your tax filing
process.

No Lock-in of Prescribed Instruments

To ensure the benefits of exemptions and deductions
under the old regime, taxpayers had to invest as per
the prescribed tax-saving norms with a lock-in
period before which funds could not be withdrawn.
The new regime lifts this restriction. You can now
invest in open-ended mutual funds, instruments or
deposits, as you deem fit; that can provide good
returns as well as withdrawal flexibility.

Flexibility in Investments
The existing tax regime restricts investment
opportunities due to the instruments specified for
availing tax concessions. The new regime grants
taxpayers wider choices in customising their
investment solutions.

At the same time, the old tax regime holds significant

advantages such as:

Lower Payable Taxes

The old tax regime permits taxpayers to secure
several deductions and exemptions for lowering their
tax liability.

For instance, Home Loan borrowers who are

currently repaying their housing loan can claim
considerable Home Loan tax benefits under the old
tax regime. Under the new regime, however, they
need to forego these rebates. Individuals who wish
to avail of a Home Loan must bear this in mind,
making it even more pertinent to shop around for
lenders o"ering a"ordable house loan deals at lower
Home Loan interest rates and competitive terms.

Encourages Savings and Investment Habits

Obtaining even a few of the exemptions and
deductions available under the old tax structure
requires you to secure tax-saving investment
options that encourage the habit of saving in
schemes such as ELSS, PPF and others.

Summing Up
The new tax system attempts to simplify the
taxation process extending more flexibility. On the
other hand, those who claim a higher volume of
exemptions may prefer continuing with the old tax
structure. Choosing the right tax regime is primarily
based on your income tax slab.

Does the old regime suit you or should you file your
taxes under the new one? This question can be
answered best if you run your taxation specifics
through an Income Tax Calculator to evaluate the
payable taxes under both regimes. Since this is a
fairly new system, it may be advisable to consult a
tax expert who can help maximise tax savings in line
with your financial goals.

DISCLAIMER:
While care is taken to update the information,
products, and services included in or available on
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may be inadvertent errors or delays in updating the
information. The material contained in this website
and on associated web pages, is for reference and
general information purposes, and the details
mentioned in the respective product/service
document shall prevail in case of any inconsistency.
Users should seek professional advice before acting
on the basis of the information contained herein.
Please take an informed decision with respect to
any product or service after going through the
relevant product/service document and applicable
terms and conditions. Neither Bajaj Housing
Finance Limited nor any of its
agents/associates/a#liates shall be liable for any
act or omission of the Users relying on the
information contained on this website and on
associated web pages. In case any inconsistencies
are observed, please click on contact information.

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