Need suggestion on selecting tax regime

Taxation
1

Hi, Let’s consider total income is 25,00,000

If the person choose old tax regime:

80C-1,50,000
HRA-1,50,000
Standard deduction - 50,000
income after deduction - 21,50,000
Income tax to be paid - 4,57,500

If the person choose new tax regime (announced in budget 2023):

Standard deduction - 50,000
income after deduction - 24,50,000
Income tax to be paid - 4,35,000

Can i go with new income tax slab?

2

@Quicko need suggestion

3

Hi @mf_investor

For an individual filing his return upto AY 2022-23 with a total income of 25,00,000,

Under the Old Regime,

You can claim the deductions and hence reduce your tax liability.
Total Income = 25,00,000
Less: Deductions (1,50,000+1,50,000+50,000)
Therefore, total taxable income = 21,50,000
Hence tax liability = 4,57,500 (12,500+1,00,000+1,50,000+1,95,000) +4% Health and education cess

Under the New Regime,
You cannot claim any deductions but take the advantage of lower tax rates. Taxpayers can opt for the new tax regime when filing ITR on or before the due date.
So, total taxable income = 25,00,000
Hence tax liability = 4,87,500 (12,500+25,000+37,500+50,000+62,500+3,00,000) +4% Health and education cess

Therefore as per the situation mentioned by you, the old tax regime would be beneficial as the tax liability is less.

You can read more about the Difference Old Tax Regime vs New Tax Regime - Learn by Quicko.

However, as per Budget 2023 announced today, the slab rate for the new regime has been updated and shall be applicable for FY 2023-24/ AY 2024-25 onwards.

Hope this helps.

1 Like
5

@Quicko Can you tell me the calculation based on Budget 2023 announced today, the slab rate for the new regime for FY 2023-24/ AY 2024-25 onwards. My question is for next year

6

Hi @mf_investor

As per the announcement in Budget 2023-24,

  1. Standard deduction of 50,000 has been introduced for salaried individuals under the New tax regime.
  2. Also, there has been a reduction in the number of tax slabs from six to five.

New Tax Regime slabs as per the Budget 2023-24:

Income Tax Rate
0-3L Nil
3L-6L 5%
6-9L 10%
9-12L 15%
12L-15L 20%
15L & above 30%

Considering this under the new regime as per the budget 2023-24,
Total Income = 25,00,000 (Assuming this is salary income as you have mentioned HRA in the question)
Less: Standard Deduction of 50,000
Therefore total taxable income = 24,50,000
Hence tax liability = ₹4,35,000 (15,000 + 30,000 + 45,000 + 60,000 + 2,85,000)
Since the taxable income is more than INR 7,00,000 you’re not eligible for rebate u/s 87A.

In comparison to the existing new tax regime, you end up saving INR 52,500 (4,87,500- 4,35,000)

Hope this helps.

1 Like
7

Sir, Is this applicable for both resident and non resident. Somewhere I read that the rebate (new tax regime) is not available for non resident.

1 Like
8

Thank you…

9

Hi @neha1101

The rebate is available to a resident in India.

10

@Quicko :- under new regime is 50k standard deduction available for all salaried individual or is it only for those whose income exceed 15L ?

11

SD applicable in new regime only if your income is 15.5L or more

12

Hi @raoawesome

As per the Budget 2023-24, under the new regime standard deduction of 50,000 is available to all salaried individuals.

13

image

Is this a mere example suggested by FM then @Quicko ? If so my mistake for the earlier post. I stand corrected.

14

Hello @t7support,

Yes, this was a comparison given by the Finance Minister that when the income of an individual crosses INR 15.5 Lakhs then eventually there would be tax saving of INR 52,500 when compared to tax under the existing new tax regime slabs.

Hope this helps!

15

@Quicko :- I am confused here. Even googled and saw the entire speech in income tax website. If we choose new income tax regime do we get standard deduction of 50,000 irrespective of income or is this only for 15L+ income earners?

16

Hello @raoawesome,

A standard deduction of INR 50,000 is introduced in the new tax regime for salaries individuals from AY 2024-25 irrespective of their total taxable income.

As mentioned in the case above, if the total taxable income is more than INR 15.5 Lakhs then the tax liability as per the revised slab of the new tax regime would be lower by INR 52,500 as compared to existing new tax regime slabs.

Hope this clarifies!

1 Like
17

I assume this is fictional example but theoretically you can claim couple of more deductions. Viz
Section 80D - Medical insurance, about 50K
NPS deductions - 50K
LTA - another 20-30K

So which regime works best, depends totally on how much deduction you are claiming. And if you have agood home loan, Old regime still makes sense.

18

@Akash_Shah I asked for my case… I don’t invest in NPS, My medical insurance is 10K per year and i never claimed LTA. so for me new regime is best…

19
20

Hey @Quicko, I understand certain deductions are not allowed under the new regime.

But in ITR3, for business income, are deductions like office supplies, telephone expenses etc. still allowed or not?

Secondly, claiming deduction under depreciation still allowed or not? Not talking about ‘additional depreciation’ here which is not allowed in the new regime.

Thanks.

1 Like
21

Hi @SachinSingh,

Business expenses like office supplies, telephone expenses, etc. are allowed under the new regime.

Also, you can claim depreciation under the new regime.

Hope it helps.