Old Vs New Tax Regime - Which Is Better New or Old Tax Regime For Salaried Employees

6/11/24, 1:54 PM Old vs New Tax Regime: Which Is Better New Or Old Tax Regime For Salaried Employees?
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HOME INCOME TAX OLD VS NEW TAX REGIME…
Old vs New Tax Regime: Which Is Better New

Or Old Tax Regime For Salaried Employees?
By Ektha Surana
Updated on: Jun 7th, 2024 | 51 min read
The Budget 2023 caused a lot of confusion among taxpayers regarding the choice between
the old and new tax regimes. The government introduced various incentives in the 2023
Budget to encourage the adoption of the new regime.
These changes show that the government intends to have taxpayers transition to the new
regime and eventually phase out the old one. Though the new regime is now the default tax
regime, the old tax regime will continue to exist.
Interim Budget 2024-2025 Updates:
No changes were made in direct taxes in the Interim Budget 2024-2025.
Let’s look at both regimes and see which regime to opt for in 2024.
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New Tax Regime
A new tax regime was introduced in Budget 2020 wherein the tax slabs were altered, and
taxpayers were offered concessional tax rates. However, those who opt for the new regime
cannot claim several exemptions and deductions, such as HRA, LTA, 80C, 80D , and more.
Because of this, the new tax regime did not have many takers. The government in the
Budget 2023 introduced 5 key changes, which remain the same even for FY 2024-2025 since
no changes were made in the Interim Budget 2024, to encourage taxpayers to adopt the
new regime. They are:
Higher Tax Rebate Limit: Full tax rebate on an income up to ₹7 lakhs has been
introduced. Whereas this threshold is ₹5 lakhs under the old tax regime. This means
that taxpayers with an income of up to ₹7 lakhs will not have to pay any tax at all
under the new tax regime!
Streamlined Tax Slabs: The tax exemption limit has been increased to ₹3 lakhs, and
the new tax slabs are:
Total Income Rate of Tax
up to ₹3,00,000 Nil
₹3,00,001- ₹6,00,000 5%
₹6,00,001- ₹9,00,000 10%
₹9,00,001- ₹12,00,000 15%
₹12,00,001- ₹15,00,000 20%
₹15,00,001 and above 30%
The tax rates under both regimes are compared as below:
New tax Regime New Tax Regime

Income Slab Old Tax Regime
(until 31st March 2023) (From 1st April 2023)
₹0 - ₹2,50,000 - - -
₹2,50,000 - ₹3,00,000 5% 5% -
₹3,00,000 - ₹5,00,000 5% 5% 5%
₹5,00,000 - ₹6,00,000 20% 10% 5%
₹6,00,000 - ₹7,50,000 20% 10% 10%
₹7,50,000 - ₹9,00,000 20% 15% 10%
₹9,00,000 - ₹10,00,000 20% 15% 15%
₹10,00,000 - ₹12,00,000 30% 20% 15%
₹12,00,000 - ₹12,50,000 30% 20% 20%
₹12,50,000 - ₹15,00,000 30% 25% 20%
>₹15,00,000 30% 30% 30%
Standard Deduction and Family Pension Deduction:
Salary income: The standard deduction of ₹50,000, which was only available under
the old regime, has now been extended to the new tax regime as well. This, along with
the rebate, makes ₹7.5 lakhs as your tax-free income under the new regime.
Family pension: Those receiving a family pension can claim a deduction of ₹15,000 or
1/3rd of the pension, whichever is lower.
Reduced Surcharge for High Net Worth Individuals: The surcharge rate on income over
₹5 crores has been reduced from 37% to 25%. This move will bring down their effective
tax rate from 42.74% to 39%.
Higher Leave Encashment Exemption: The exemption limit for non-government
employees has been raised from ₹3 lakhs to ₹25 lakhs, an 8-fold increase.
Default Regime: Starting from FY 2023-24, the new income tax regime will be set as the
default option. If you want to continue using the old regime, you must submit the
income tax return along with Form 10IEA before the due date. You will have the option
to switch between the two regimes annually to check the tax benefits.
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Old Tax Regime
The old regime is the tax system that prevailed before the introduction of the new regime.
Under this regime, there are over 70 exemptions and deductions available, including HRA
and LTA, that can reduce your taxable income and lower tax payments. The most popular
and generous deduction is Section 80C, which allows for a reduction of taxable income up
to Rs.1.5 lakh. The taxpayers are given a choice between the old and the new tax regime.
Difference Between Old Vs New Tax Regime: Which is Better?
The decision to switch to the new or remain in the old tax regime or which regime is better
for you shall be based on the tax savings deductions and exemptions you are eligible for in
the old tax regime. To make it easier, we have calculated a breakeven point for various
income levels (refer to the table below) for a salaried individual below 60 years of age. This
can be used to determine which regime to choose.
The Breakeven Threshold for Deciding Between New vs Old Tax Regimes
The Breakeven point is that amount where there will be no difference in tax liability between
the two tax regimes.
If your total eligible deductions and exemptions in the old tax regime are higher than the
breakeven threshold for your income level, it is advisable to stay in the old regime. On the
other hand, if the breakeven threshold is higher, then moving to the new tax regime is more
beneficial.
If you have salary income:
Additional
Which
Deductions
Regime to
Less: Tax under (over & above choose old
Income Net
Standard both standard or new tax
Level Income
Deduction regimes deduction) required regime
in Old Regime to
Break Even
You will benefit
only in new
₹7,00,000 ₹50,000 ₹6,50,000 ₹0 ₹1,50,000 regime.
Old regime: if
deductions > Rs
1,38,500
₹8,00,000 ₹50,000 ₹7,50,000 ₹36,400 ₹1,38,500
New regime: if
deductions < Rs
1,38,500
Old regime: if
deductions > Rs
2,12,500
₹9,00,000 ₹50,000 ₹8,50,000 ₹41,600 ₹2,12,500
New regime: if
deductions < Rs
2,12,500
Old regime: if
deductions > Rs.
2,50,000
₹10,00,000 ₹50,000 ₹9,50,000 ₹54,600 ₹2,50,000
New regime: if
deductions < Rs
2,50,000
Old regime: if
deductions > Rs.
3,12,500
₹12,50,000 ₹50,000 ₹12,00,000 ₹93,600 ₹3,12,500
New regime: if
deductions < Rs
3,12,500
Old regime: if
deductions > Rs.
3,58,000
₹15,00,000 ₹50,000 ₹14,50,000 ₹1,45,600 ₹3,58,000
New regime: if
deductions < Rs
3,58,000
Old regime: if
deductions > Rs.
3,75,000
₹15,50,000 ₹50,000 ₹15,00,000 ₹1,56,000 ₹3,75,000
New regime: if
deductions < Rs
3,75,000
Old regime: if
deductions > Rs.
3,75,000
₹16,00,000 ₹50,000 ₹15,50,000 ₹1,71,600 ₹3,75,000
New regime: if
deductions < Rs
3,75,000
If you have income other than salary:
Tax under Old vs New Regime
Here are a few calculations that will help you decide between the old vs the new tax regime:
When total deductions are ₹1.5 lakhs or less: The new regime will be beneficial
When total deductions are more than ₹3.75 lakhs: The old regime will be beneficial
When total deductions are between ₹1.5 lakhs to ₹3.75 lakhs: will depend on your
income level.
When total deductions are ₹1.5 lakhs or less: The new tax regime will be beneficial
When total deductions are more than ₹3.75 lakhs: The old tax regime will be beneficial
When total deductions are between ₹1.5 lakhs to ₹3.75 lakhs: Will depend on various
income levels
What Deductions and Exemptions are Allowed Under the New Tax Regime?
Here is a comparison between the deductions and exemptions available under the new and
the old tax regime:
New tax New Tax
Old Tax Regime Regime

Particulars
Regime (until 31st (From 1st
March 2023) April 2023)
Income level for rebate eligibility ₹ 5 lakhs ₹ 5 lakhs ₹ 7 lakhs
Standard Deduction ₹ 50,000 - ₹ 50,000
₹ 5.5
Effective Tax-Free Salary income ₹ 5 lakhs ₹ 7.5 lakhs
lakhs
Rebate u/s 87A ₹12,500 ₹12,500 ₹25,000
HRA Exemption ✓ X X
Leave Travel Allowance (LTA) ✓ X X
Other allowances including food allowance

✓ X X
of Rs 50/meal subject to 2 meals a day
Standard Deduction (Rs 50,000) ✓ X ✓
Entertainment Allowance and Professional

✓ X X
Tax
Perquisites for official purposes ✓ ✓ ✓
Interest on Home Loan u/s 24b on: Self-

✓ X X
occupied or vacant property
Interest on Home Loan u/s 24b on: Let-out

✓ ✓ ✓
property
Deduction u/s 80C (EPF | LIC | ELSS | PPF |

✓ X X
FD | Children's tuition fee etc)
Employee's (own) contribution to NPS ✓ X X
Employer's contribution to NPS ✓ ✓ ✓
Medical insurance premium - 80D ✓ X X
Disabled Individual - 80U ✓ X X
Interest on education loan - 80E ✓ X X
Interest on Electric vehicle loan - 80EEB ✓ X X
Donation to Political party/trust etc - 80G ✓ X X
Savings Bank Interest u/s 80TTA and 80TTB ✓ X X
Other Chapter VI-A deductions ✓ X X
All contributions to Agniveer Corpus Fund -

✓ Did not exist ✓
80CCH
Deduction on Family Pension Income ✓ X ✓
Gifts upto Rs 50,000 ✓ ✓ ✓
Exemption on voluntary retirement 10(10C) ✓ ✓ ✓
Exemption on gratuity u/s 10(10) ✓ ✓ ✓
Exemption on Leave encashment u/s

✓ ✓ ✓
10(10AA)
Daily Allowance ✓ ✓ ✓
Conveyance Allowance ✓ ✓ ✓
Transport Allowance for a specially-abled

✓ ✓ ✓
person
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How to Choose Between Old and New Tax Regimes?
When deciding between the two tax regimes, it is important to take into account the tax
exemptions and deductions available under the old tax regime. After deducting all eligible
exemptions and deductions, the net taxable income can be determined. By calculating the
tax liability based on this net taxable income under the old tax regime, it becomes possible
to compare it with the tax liability under the new tax regime.
Choosing the regime with the lower tax liability is the logical approach, and it is essential to
inform the employer about this choice so that the appropriate Tax Deducted at Source
(TDS) can be deducted from the salary.
If you have a loss from house property, capital gains, or business & profession, you need to
consider them as well while making informed decisions on the selection of regime. Along
with the current year's losses, even the previous year's losses eligible to set off will get lapsed
as well. Ineligibility to carry forward such losses may impact your future income
determination and taxes thereon.
Conclusion
Many individuals often find themselves questioning the disparities between the old and new
tax regimes. The new income tax regime is designed to accommodate those who have more
personal commitments such as repayment of personal/vehicle loans, medical treatment of
parents or dependents, or wish to avoid the burden of extensive tax preparation or have
minimal tax deductions due to their ineligibility for section 10 exemptions, standard
deductions, tax on employment, employer contribution to pension scheme etc., Conversely,
the old tax regime can yield more tax savings for senior citizens, who derive a substantial
portion of their income from interest, can benefit from Section 80TTB, which allows them to
claim Rs.50,000 as interest income deduction and feel more secure under the old tax
regime.
Both the old and new tax regimes possess advantages and disadvantages. The previous tax
structure encourages taxpayers to cultivate a habit of saving, while the new tax structure
favours employees with lower earnings and investments, resulting in fewer deductions and
exemptions. The new tax system is considered safer and simpler, involving fewer records and
reducing the potential for tax evasion fraud. However, due to the unique nature of individual
deductions and exemptions, a thorough comparison of the two regimes is necessary to
determine the best fit for each person.
Also Read About:
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2. Income Tax Benefit on House Loan
3. National Savings Certificate - Eligibility, Interest Rate & Tax Saving Benefits
4. Income Tax Customer Care Number And Email ID Details
5. New Tax Regime 2024
6. Income Tax Slabs 2023-24

7. Income Tax Customer Care
8. Budget 2024 Highlights
Frequently Asked Questions
What is the old tax regime?
The old tax regime is the existing tax structure under which taxpayers can claim various
deductions and exemptions under different sections of the Income Tax Act. It has a higher
tax rate but allows taxpayers to claim tax benefits on various investments and expenses.
What is the new tax regime?
The new tax regime is a simplified tax structure introduced in Budget 2020, under which
taxpayers can pay lower taxes but have to forego maximum deductions and exemptions.
The new tax regime has lower tax rates than the old regime but eliminates the tax
benefits of various investments and expenses.
Can I switch between the old and new tax regime?
Yes, taxpayers can switch between the old and new tax regimes every year at the time of
filing their tax returns. However, once you opt for the new tax regime for a year, you
cannot claim any tax benefits available in the old tax regime. However, if the Individuals
with income from business and profession once opted for the new tax regime in any of the
previous FYs and in the current FY opts for the old tax regime then it is not allowed to
switch back to the new tax regime in any of the subsequent FYs.
Which tax regime is better for 7 lakhs?
If you have an income of Rs 7 lakhs, the new tax regime will benefit you.
Which tax regime is better for a 10 lakhs salary?
If you have an income of Rs 10 lakhs, the old tax regime will benefit you only if you have
made tax savings investments (deductions other than standard deductions) of over Rs
2,62,500.
If these deductions are less than Rs 2,62,500, then the new regime will be better for you.
The old tax regime is good for you if you have invested more than Rs 3,12,500 in tax-
saving schemes. If you have invested or spent less than Rs 3,12,500, then the new regime
will be better for you.
Which tax regime is better for 15 lakhs salary?
Which regime is better for you will depend on the amount of tax-saving investments you
have made:
Old regime: if tax-saving investments > Rs. 3,75,000
New regime: if tax-saving investments < Rs 3,75,000
If you have an income of Rs 20 lakhs, the best regime for you will depend on the tax
deductions you are eligible for:
If you have an income of Rs 25 lakhs, the best regime for you will depend on the tax
deductions you are eligible for:
If you have an income of Rs 30 lakhs, the new regime will benefit you if your tax
deductions are less than Rs 3,75,000. Otherwise, opt in for the old tax regime.
If you have an income of Rs 50 lakhs, the old regime will be beneficial for you if your total
tax saving deductions are Rs 3,75,000 or more. Otherwise, opt-in for the new tax regime.
Particulars Tax under new regime Tax under old regime
Salary 50,00,000 50,00,000
Standard Deduction (50,000) (50,000)
Deductions (3,75,000) -
Taxable Income 45,75,000 49,50,000
Tax due on above 12,32,400 12,32,400
What deductions are allowed in the new tax regime?
One can claim few selective deductions under the new tax regime for FY 2023-24 such as
standard deduction of Rs.50,000, interest on Home Loan u/s 24b on let-out property,
employer’s contribution to NPS u/s 80CCD, Contributions to Agniveer Corpus Fund u/s
80CCH, Deduction on Family Pension Income (lower of 1/3rd of actual pension or 15,000) is
applicable for the FY 23-24.
Is HRA exemption available in the new tax regime?
No, HRA exemption u/s10(13A) is not allowed in the new tax regime. Along with that most
claimed exemptions are also NOT allowed such as Leave Travel Allowance (LTA),
Exemption on voluntary retirement 10(10C), Exemption on gratuity u/s 10(10), Exemption on
Leave encashment u/s 10(10AA), Daily Allowance, Transport Allowance for a specially-
abled person, Conveyance Allowance etc.
Which form shall be filed for opting for the old tax regime?
Form 10-IEA must be filed for opting to pay taxes under the old tax regime.
Ektha Surana
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6/11/24, 1:54 PM Old vs New Tax Regime: Which Is Better New Or Old Tax Regime For Salaried Employees?

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Old vs New Tax Regime: Which Is Better New

Updated on: Jun 7th, 2024 | 51 min read

Budget to encourage the adoption of the new regime.

regime, the old tax regime will continue to exist.

Interim Budget 2024-2025 Updates:

No changes were made in direct taxes in the Interim Budget 2024-2025.

New Tax Regime

new regime. They are:

under the new tax regime!

the new tax slabs are:

Total Income Rate of Tax

₹6,00,001- ₹9,00,000 10%

₹9,00,001- ₹12,00,000 15%

₹12,00,001- ₹15,00,000 20%

₹15,00,001 and above 30%

The tax rates under both regimes are compared as below:

New tax Regime New Tax Regime

₹5,00,000 - ₹6,00,000 20% 10% 5%

₹6,00,000 - ₹7,50,000 20% 10% 10%

₹7,50,000 - ₹9,00,000 20% 15% 10%

₹9,00,000 - ₹10,00,000 20% 15% 15%

₹10,00,000 - ₹12,00,000 30% 20% 15%

₹12,00,000 - ₹12,50,000 30% 20% 20%

₹12,50,000 - ₹15,00,000 30% 25% 20%

>₹15,00,000 30% 30% 30%

Standard Deduction and Family Pension Deduction:

1/3rd of the pension, whichever is lower.

tax rate from 42.74% to 39%.

Higher Leave Encashment Exemption: The exemption limit for non-government

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Old Tax Regime

Difference Between Old Vs New Tax Regime: Which is Better?

can be used to determine which regime to choose.

the two tax regimes.

If you have salary income:

You will benefit

₹7,00,000 ₹50,000 ₹6,50,000 ₹0 ₹1,50,000 regime.

deductions > Rs.

deductions > Rs.

deductions > Rs.

deductions > Rs.

deductions > Rs.

If you have income other than salary:

Tax under Old vs New Regime

the old tax regime:

New tax New Tax

Old Tax Regime Regime

March 2023) April 2023)

Income level for rebate eligibility ₹ 5 lakhs ₹ 5 lakhs ₹ 7 lakhs

Standard Deduction ₹ 50,000 - ₹ 50,000

Rebate u/s 87A ₹12,500 ₹12,500 ₹25,000

Leave Travel Allowance (LTA) ✓ X X

Other allowances including food allowance

Standard Deduction (Rs 50,000) ✓ X ✓