Old vs New Tax Regime FY 2023-24 (AY 2024-25)

Learning the comparison of the old vs new tax regime in the FY 2023-24 (AY 2024-25) is crucial for you to make informed choices for your income tax filing. The new tax regime introduced in Budget 2023 brings more simplified rates but fewer tax exemptions. The old tax regime offers you traditional slabs and more tax benefits. This article will help you choose between the old and new tax regimes and let you understand what aligns best with your financial profiles and tax planning strategies.

Read more
Save Tax
Upto ₹46,800 Under Sec 80C
Best Tax Saving Plans
  • High Returns

    Get Returns as high as 17%*
  • Zero Capital Gains tax^

    unlike 10% in Mutual Funds
  • Save upto Rs 46,800

    in Tax under section 80 C
We are rated~
rating
6.7 Crore
Registered Consumers
51
Insurance Partners
3.4 Crore
Policies Sold
Get Instant Tax Receipts
Save upto ₹46,800 in Taxes Under Section 80C
+91
Secure
We don’t spam
View Plans
Please wait. We Are Processing..
Your personal information is secure with us
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated~
rating
6.7 Crore
Registered Consumers
51
Insurance Partners
3.4 Crore
Policies Sold

About the New Tax Regime

In the Union Budget 2020, the Government of India introduced a new regime tax slab for individuals, businesses, and Hindu Undivided Families (HUFs) under Section 115 BAC of the Income Tax Act, 1961. 

This new tax regime has been in effect since 1 April 2020 (FY 2020-21). Later, in Budget 2023, the government introduced a better and new tax structure under Section 115 BAC. 

NOTE: The new tax regime of Budget 2023 replaces the previously introduced new tax regime of Budget 2020 under Section 115BAC of the Income Tax Act.

Key Features of the New Tax Regime:

  • Reduced Tax Rates: The new tax regime offers lower tax rates for different income tax slabs. But you have to give up various tax deductions and exemptions in the new tax regime in comparison to the old tax regime.

Income Tax Slabs (in Rs.) Income Tax Rates (in % p.a.)
0 - Rs. 3 lakhs Nil
Rs. 3 lakhs - Rs. 6 lakhs 5%
Rs. 6 lakhs - Rs. 9 lakhs 10%
Rs. 9 lakhs - Rs. 12 lakhs 15%
Rs. 12 lakhs - Rs. 15 lakhs 20%
Rs. 15 lakhs & above 30%
  • Default Option: The new tax regime is now the default option for taxpayers, meaning you have to specifically select the old tax regime if you wish to utilise it.

  • Higher Exemption Limit: The basic tax exemption limit in the new tax regime has been increased from Rs. 2.5 lakhs in the old tax regime slabs to Rs. 3 lakhs in the new tax regime.

  • Tax Rebate: A tax rebate has been introduced under Section 87A for income up to Rs. 7 lakhs, which was previously set at Rs. 5 lakhs in the old income tax regime.

  • Standard Deduction in New Tax Regime:

    • For Salaried Income: In the new tax regime, the standard deduction of Rs. 50,000 remains applicable. This means that regardless of your income, you can subtract Rs. 50,000 from your gross salary before calculating the taxable income.

    • For Family Pension: The deduction for family pension has been increased to Rs. 15,000 or 1/3rd of the pension (whichever is lower). This benefit is provided to you if you receive a family pension from the government or a private organisation.

  • Surcharge Reduction for High Net-worth Individuals (HNIs): The surcharge rate on income exceeding Rs. 5 crores has been reduced from 37% in the old tax regime slabs to 25% in the new tax regime slabs. This reduction will lower the effective tax rate for High Net-worth Individuals (HNIs) from 42.74% to 39%.

  • Higher Leave Encashment Exemption: Non-government employees can now enjoy a higher exemption limit for leave encashment. The leave encashment limit increased from Rs. 3 lakhs in the income tax old regime to Rs. 25 lakhs in the new regime.

  • No LTCG Benefit: The income tax slab new regime does not provide Long-Term Capital Gains (LTCG) benefits on debt funds invested after 31 March 2023.

About the Old Tax Regime

The old tax regime was in place before the introduction of the new tax regime in the Union Budget 2023. It has five old tax slab rates that range between 0% to 30%.

In this regime, the initial tax exemption limit for you is Rs. 2.5 lakhs, with an additional standard deduction of Rs. 50,000.

Key Features of the Old Tax Regime:

  1. Old Regime Tax Slabs:

    The income tax old regime provides 5 tax slabs with old tax slab rates ranging from 0 to 30% p.a.

    The following table shows the income tax slabs in India for the old regime:

    Old Tax Regime Slabs  (Rs. in lakhs) Old Regime Tax Slab Rates  (in % p.a.)
    0 – Rs. 2.5 lakhs Nil
    Rs. 2.5 lakhs – Rs. 5 lakhs 5% (Rebate u/ Section 87A is available)
    Rs. 5 lakhs – Rs. 7.5 lakhs 20%
    Rs. 7.5 lakhs – Rs. 10 lakhs 20%
    Rs. 10 lakhs – Rs. 12.5 lakhs 30%
    Rs. 12.5 lakhs – Rs. 15 lakhs 30%
    Rs. 15 lakhs & above 30%
  2. More Tax Deductions and Exemptions:

    Under the old tax regime, you have access to over 70 exemptions and deductions, including Section 80C, Section 10(10D), HRA and LTA. This enables you to lower your taxable income and reduce your tax obligations.

  3. LTCG Benefits: The old tax slab regime provides Long-Term Capital Gains (LTCG) benefits on your investments in debt funds.

  4. Some of the most common exemptions and deductions under the income tax old regime are mentioned below:

    • Section 80CAllows for a deduction of up to Rs. 1.5 lakhs on investments made in various savings schemes, such as ULIP, EPF, PPF, and ELSS.

    • Section 80D: Allows for a deduction of up to Rs. 50,000 on medical expenses incurred for self, spouse, parents, and children.

    • Section 80 TTB: Allows for a deduction of up to Rs. 10,000 on interest income from savings accounts and post office deposits.

    • House Rent Allowance (HRA): Allows for a deduction of the actual amount of HRA received or 50% of the basic salary, whichever is lower.

    • Leave Travel Allowance (LTA): Allows for a deduction of the actual amount of LTA received or 40% of the basic salary, whichever is lower.

    • Tax Rebate: You can get a tax rebate on income of up to Rs. 5 lakhs under Section 87A.

    • Standard Deduction: Salaried individuals can avail of tax deductions of up to Rs. 50,000.

Invest & Save upto ₹46,800 per annum in taxInvest & Save upto ₹46,800 per annum in tax

Old vs New Tax Regime in FY 2023-24 (AY 2024-25)

Deciding between the new tax regime vs the old one depends on a comparative analysis of the overall benefits from different tax slab rates and deductions available for you under both tax regimes. 

To make it easier, we have compared old and new tax regimes based on various parameters in the following sections.

Income Tax Slab for Old Regime vs New Tax Regime

Income Tax Slab Income Tax Rate (in % p.a.)
Old Tax Regime New Tax Regime
For Individuals/ HUFs/ NRIs (age < 60 years) For Individuals/ HUFs/ NRIs (age 60 - 80 years) For Individuals/ HUFs/ NRIs (age > 60 years) Tax Rates until 31 March 2023 Tax Rates from 01 April 2023
0 – Rs. 2.5 lakhs NIL NIL NIL NIL NIL
Rs. 2.5 lakhs – Rs. 3 lakhs 5%  NIL NIL 5% NIL
Rs. 3 lakhs – Rs. 5 lakhs 5% 5%  NIL 5% 5%
Rs. 5 lakhs – Rs. 6 lakhs 20% 20% 20% 10% 5%
Rs. 6 lakhs – Rs. 7.5 lakhs 20% 20% 20% 10% 5%
Rs. 7.5 lakhs – Rs. 9 lakhs 20% 20% 20% 15% 10%
Rs. 9 lakhs – Rs. 10 lakhs 20% 20% 20% 15% 15%
Rs. 10 lakhs – Rs. 12 lakhs 30% 30% 30% 20% 15%
Rs. 12 lakhs – Rs. 12.5 lakhs 30% 30% 30% 20% 20%
Rs. 12.5 lakhs – Rs. 15 lakhs 30% 30% 30% 25% 20%
Rs. 15 lakhs & above 30% 30% 30% 30% 30%

Surcharge Rates for Old vs New Tax Regime (FY 2023-24)

Surcharge Rates for FY 2023-24 (AY 2024-25)
Income Range Surcharge Rates for Old Tax Regime FY 2023-24 Surcharge Rates for  New Tax Regime FY 2023-24
Rs. 50 lakhs- Rs. 1 crore 10% 10%
Rs. 1 crore- Rs. 2 crores 15% 15%
Rs. 2 crores- Rs. 5 crores 25% 25%
Rs. 5 crores- Rs. 10 crores 37% 25%
Rs. 10 crores & above 37% 25%

Deductions/ Exemptions under Old vs New Tax Regime (AY 2024-25)

The tax deductions and exemptions under the old regime and new tax regime for FY 2023-24 are as follows:

Income Tax Deductions/ Exemptions Details Old Tax Regime Previous Tax Regime (until 31 March 2023) New Tax Regime (Applicable from 1 April 2023)
Income Limit for Tax Rebate Income tax rebate provided for a certain income limit Rs. 5 lakhs Rs. 5 lakhs Rs. 7 lakhs
Section 87A You can claim a 100% tax rebate of up to Rs. 25,000 for income of up to Rs. 7 lakhs. Rs. 12,500 Rs. 12,500 Rs. 25,000
Standard Deduction Rs. 50,000 for Salaried Class individuals Rs. 50,000 NA Rs. 50,000
Effective Tax-Free Salary Income The tax-free income level after including deductions and exemptions on salary limit Rs. 5.5 lakhs Rs. 5 lakhs Rs. 7.5 lakhs
Standard Deduction on Family Pension Lower of Rs. 15,000 or 1/3rd of the pension amount for Pensioners Rs. 15,000 Rs. 15,000 Rs. 15,000
HRA Exemption On HRA allowance for salaried employees YES NO NO
Transport Allowance For Specially Abled individuals YES YES YES
Conveyance Allowance Expenses for travelling to and fro for work OR on transfer YES YES YES
Entertainment Allowance & Professional Tax Deductions on entertainment allowance and professional tax YES NO NO
Perquisites for Official Purposes Deductions on perquisites paid for office purposes YES YES YES
Section 80CCD(1) Employee's contribution to National Pension Scheme (NPS) account YES NO NO
Section 80CCD(2) Employer's contribution to the National Pension Scheme (NPS) account of an employee YES YES YES
Section 80C Deductions on investments made in ULIP/ ELSS/ LIC/ PPF/ Tax-Saver FDs/ Child Tuition Fee YES NO NO
Section 80D Deductions on medical insurance premium YES NO NO
Section 80E For interest paid on an education loan YES NO NO
Section 80 EEB Interest paid on Electric Vehicle (EV) loan YES NO NO
Section 80G Deductions on donations paid to political parties YES NO NO
Section 80JJAA Deductions are allowed when new employees are employed  YES YES YES
Section 80U Deductions for disabled individuals YES NO NO
Other Chapter VI-A Deductions Other deductions available under Chapter VI-A of the IT Act, 1961 YES NO NO
Section 32 Depreciation on tangible assets (other than additional depreciation) YES YES YES
Section 24(B) Internet paid on home loan for a self-occupied or vacant property YES NO NO
Section 24(A) Interest paid on a home loan of a Letting-out property YES YES YES
Section 80 CCH Contributions made to Agniveer Corpus Fund YES NOT EXISTED YES
Gifts  Up to Rs. 50,000 YES YES YES
Section 10(10C) On Voluntary retirement amount YES YES YES
Section 10(10) On Gratuity amount YES YES YES
Section 10(10AA) On leave encashment YES YES YES

Which one is Better: The Old vs New Tax Regime?

In an old vs new tax regime comparison, you may find the old regime advantageous if you are eligible for deductions and exemptions. However, the new tax system in India provides reduced rates for individuals earning up to Rs. 15 lakhs annually. 

  1. Advantages of Income Tax Old Regime:

    • Lower tax liability: For high earners with substantial deductions, the overall tax burden can be lower.

    • Investment benefits: Encourages long-term investments through tax-saving options.

    • Higher returns: Allows earning income from investments while claiming tax deductions on them.

  2. Advantages of the New Regime:

    • Lower tax rates: Offers simplified tax slabs with lower rates for lower-income earners (up to 7 lakhs).

    • Ease of compliance: No need to maintain investment proofs or claim deductions, making filing simpler.

    • Increased disposable income: More take-home pay due to lower tax rates.

    RESULT:

    1. Old Tax Regime

      • Promotes savings and investment. 

      • It not only saves your income tax liability but helps you grow your corpus in the long term through tax-saving investments. 

      • The old income tax regime provides dual benefits of investments along with tax benefits.

    2. New Tax Regime

      • It promotes consumer behaviour, where your investments reduce and expendable income increases. 

      • It simplifies the tax structure to bring more taxpayers into its pivot.

      To determine which tax system is preferable for you, let us have a look at the examples of two individuals.

Illustration of the Old vs New Tax Regime Comparison

Let us assume the following details of income and investments for two individuals:

Particulars for FY 2023-24 Taxpayer X   (Amount in Rs.) Taxpayer Y   (Amount in Rs.)
Income from Salary Rs. 20 lakhs Rs. 10 lakhs
HRA Rs. 1.2 lakhs Rs. 1 lakhs
LTA Rs. 50,000 Rs. 50,000
Standard deduction u/ Sec 87A Rs. 50,000 Rs. 50,000
Deductions u/s 80C Rs. 1.5 lakhs Rs. 1.5 lakhs

Old vs New Tax Regime - Which is the Better Tax Regime for Taxpayer X?

Particulars Old Tax Regime (in Rs.) New Tax Regime (in Rs.)
Income from Salary Rs. 20 lakhs Rs. 20 lakhs
(-) Exemption for HRA Rs. 1.2 lakhs NA
(-) Exemption for LTA Rs. 50,000 NA
(-) Standard Deduction Rs. 50,000 Rs. 50,000
(-) Deduction under Section 80C for PF Rs. 1.5 lakhs NA
Net taxable income Rs. 16.3 lakhs Rs. 19.5 lakhs
Chargeable Income Tax Rs. 3.13 lakhs Rs. 3.12 lakhs

Old vs new tax regime - which is the better tax regime for Taxpayer Y?

Particulars Old Tax Regime (in Rs.) New Tax Regime (in Rs.)
Income from Salary Rs. 10 lakhs Rs. 10 lakhs
(-) Standard Deduction Rs. 50,000 Rs. 50,000
(-) Exemption for LTA Rs. 1 lakhs NA
(-) Exemption for HRA Rs. 50,000 NA
(-) Deduction under Section 80C for PF Rs. 1.5 lakhs NA
Net taxable income Rs. 6.5 lakhs Rs. 9.5 lakhs
Chargeable Income Tax Rs. 42,500 Rs. 52,500

How to Decide Between Old vs New Tax Regime?

To determine the best tax regime for you, you must take into account factors like annual income, investment goals, family status, and risk tolerance. 

Consider the following observations before making a choice between the old vs new tax regime for FY 2023-24: 

  • The new income tax slab benefits you more if you are a middle-class taxpayer with an income of up to Rs. 15 lakhs.

    • For instance, if your income before deductions is up to Rs 12 lakh and your investments are less than Rs 1.91 lakh, the new regime can save you more on taxes.

  • If you have invested in tax-saving instruments, medical claims, life insurance, education expenses, or home loan EMIs, the old regime provides more deductions and lower taxes.

  • The old tax regime slabs suit high-income earners above Rs. 15 lakhs who make more investments.

  • The new regime is advantageous if you make minimal investments and can claim deductions under Rs. 1.5 lakhs annually. This is because of the lower tax slab rates in this tax regime.

  • The old tax regime is more beneficial if your annual deductions are higher than Rs. 3.75 lakhs.

  • If your annual deductions stand between Rs. 1.5 lakhs to Rs. 3.75 lakhs, then the right choice of tax regime depends on your income level.

THEREFORE: It must be noted that to choose between regimes, compare and analyse both, as the best option varies from person to person.

Old vs New Tax Regime Calculator

The Policybazaar Income Tax Calculator is an online tool that helps you compare your tax liability under the old regime and the new income tax regimes. This allows you to assess the financial implications of choosing between the two tax regimes. 

The Old vs. New Tax Regime Calculator is a fast, easy and hassle-free tool that simply considers the following factors for the calculations:

  • Your Income

  • Eligible Deductions

  • Tax Exemptions 

The calculator will then calculate your tax liability under the old tax regime and new tax regime and will help you learn which regime is better for you. Ultimately, this enables you to improve your financial planning and tax optimisation.

When Can You Choose - An Old or New Tax Regime?

Category of Taxpayer When to Choose Between Old vs. New Tax Regime
Salaried Individuals or Hindu Undivided Families (HUFs)
  • Choose the new tax regime at the start of the financial year.
  • Once selected, you cannot switch back to the old regime within the same financial year.
  • You can make a new choice for the tax regime at the beginning of the next financial year.
Businesses and Self-Employed Professionals If you earn income from a business or profession, you can select a tax regime only once in your lifetime.

Conclusion

Neither the old nor new tax regimes are universally better for anyone in the financial year 2023-24. Choosing the ideal one depends on your income, investments, and deductions you avail. The new tax regime lowers the tax rates for most income brackets. There is no need to manage deductions, leading to simpler income tax e-filing. The new tax regime also provides for a higher tax-free limit of Rs. 7 lakhs from Rs. 5 lakhs in the income tax old regime. However, the biggest con of the income tax new regime is that it takes away most of the deductions like Section 80C, 10(10D), HRA, LTA, and more, which were earlier available with old tax regime slabs. This leads to higher taxes for incomes above Rs. 15 lakhs.

Selecting the old tax regime can increase your savings with various tax exemptions and deductions under the Income Tax Act, 1961. The old income tax slab regime emphasises savings and investment, which lowers your income tax and boosts your long-term wealth growth through tax-saving investments. Hence, the old income tax regime offers a double advantage by encouraging both investments and tax benefits. However, you have to be mindful of the drawbacks, such as increased paperwork and a lower tax-free limit. 

FAQ's

  • Which is best, the new tax regime or the old?

    Both the new and old tax regimes have advantages and disadvantages, and the best one for you depends on your individual circumstances, income level, and investment/deduction strategies.

    Who should choose the new regime:

    • Salaried individuals with low investments and minimal deductions.

    • Taxpayers with income up to Rs. 7 lakhs.

    • Anyone who values simplicity and ease of filing over potential tax savings.

    Who should choose the old regime:

    • Individuals with large investments and deductions (usually exceeding Rs. 1.5 lakhs).

    • High-income earners utilising HRA, medical insurance deductions, etc.

    • Someone comfortable with complex filing for potential tax benefits.

  • What is the new tax regime for 2023?

    The new tax regime in India for FY 2023-24 (assessment year 2024-25) aims to simplify tax filing by offering lower rates but eliminating most deductions. The new regime is now the default option. You must specifically choose the old regime if you prefer it. However, you can switch between regimes annually.
  • How can I save taxes in the new tax regime?

    While the new tax regime does not offer the direct deduction benefits like the old tax regime, there are still ways to minimise your tax burden within its framework. Here are some strategies you can adopt:
    • Maximise Standard Deduction

    • Utilise Employer's NPS Contribution

    • Claim Deductions Allowed in the New Regime (Interest on Home Loan, Transport Allowance for Persons with Disabilities, Conveyance Allowance, and Leave Encashment and Gratuity)

  • Is the standard deduction of 50000 applicable in the new tax regime?

    Yes, the standard deduction of Rs. 50,000 is definitely applicable in the new tax regime for salaried individuals and pensioners for FY 2023-24 and onwards.ll
  • When can I select the old or new tax regime?

    You can select the old and new tax regime at the beginning of each financial year. 
    • Salaried individuals: Salaried individuals can choose the tax regime for TDS on salary by submitting Form 10IE to their employer. The form must be submitted before the start of the financial year.

    • Other individuals: Other individuals, such as business owners and professionals, can choose the tax regime when they file their Income Tax Return (ITR). You can file the ITR through the e-filing 2.0 portal by the extended due date of July 31 of the following financial year.

  • Which tax regime is better for Rs. 12 lakhs salary?

    For a 12 lakhs salary, the old tax regime is likely to be better for you if you can claim deductions and exemptions of more than Rs 3 lakh. Suppose you cannot claim deductions and exemptions of more than Rs 3 lakh, then the new tax regime may be better for you.
  • Can I claim 80C in the new tax regime?

    No, you cannot claim Section 80C deductions under the new tax regime. One of the deductions that is not available under the new regime is the Section 80C deduction.
  • What is the disadvantage of new tax regime?

    Listed below are the disadvantages of new tax regime 2023-24:
    • The new tax regime takes away all the major tax exemption benefits that were allowed in old tax regime.
    • Once chosen the new regime the businesses cannot switch to the old tax regime.
    • The deductions that are important for middle-class earners like education loan, life insurance premiums, health insurance maturity amounts, and more are taxable in new regime.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

Income Tax articles

Recent Articles
Popular Articles
Section 80EEA - Deduction for Interest on Home Loan

05 Jun 2024

Section 80EEA of the Income Tax Act provides a significant tax
Read more
Section 80CCE of the Income Tax Act

29 May 2024

Section 80CCE of the Income Tax Act provides taxpayers with
Read more
Section 80CCC of the Income Tax

06 May 2024

Section 80CCC, part of the broader 80C category in the Income
Read more
Income Tax Proof

28 Feb 2024

Income tax proofs play an important role during tax assessment
Read more
How to Save Tax on 9 Lakhs Salary

22 Feb 2024

It is stressful to let taxes eat up your hard-earned money. This
Read more
Deductions in New Tax Regime Under Union Budget 2023-24
There are no major changes made when it comes to deductions in the new tax regime under the recent Union Budget
Read more
What is Form 16 & How to Download It
Form 16 is a significant document provided by employers in India to their employees,  which serves as proof of
Read more
Leave Encashment Tax Exemption - Section 10(10AA)
Leave Encashment Tax Exemption under Section 10(10AA) provides a significant financial benefit for employees
Read more

top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL