As the new financial year of 2023-2024 initiates, it is time for salaried individuals to choose the regime in which their income will be taxed. But the decision could be clearer in light of specific changes in the new regime tax such as tax slabs, rates, and more.

The good news is to help with this, the Income Tax Department has launched a tax calculator on its website. You have to fill in relevant details such as total income, exemptions, and deductions, and the calculator will reveal liabilities under both regimes.

As such, people can compare the tax they have to pay in the old tax regime and the new tax regime. With that information, they can make a better choice.

Learn how to make use of the tax calculator and what is old and new tax regime as well:

What is Old and New Tax Regime?

The Indian Income Tax System levies a tax on individuals depending on their income levels. However, 2020-2021 introduced a new method of levying taxes, further refined in the Budget 2023 to support its implementation.

So, what is the old and new tax regime?

The most popular feature of the old tax regime is the basic 70 exclusions and deductions available, including the HRA and LTA, which help to reduce taxable income and payments.

On the other side, the new tax regime features reduced tax slabs while not including many of the older exemptions and deductions such as HRA, LTA, and more. Additionally, if your income is up to INR 7,00,000, you don't have to pay taxes in the new regime. In contrast, this amount was INR 5,00,000 under the old regime.

Moreover, the tax slabs rate as per the new regime is:

How to Make the Choice Between Old and New Tax Regimes?

In case a person is confused about how to choose between old and new tax regime, they can use the tax calculator available on the official website of the Income Tax department. An income tax calculator is a dedicated online tool that assists you in evaluating taxes based on your income, according to the Budget 2023 announcement.

1. Tax Calculator: Steps to Follow to Calculate and Compare Tax Liability

Here’re the steps that you can take to understand your tax liability under both the old tax regime and new tax regime:

• Visit the Income Tax Department's official website to find the tax calculator
• Fill in the relevant details, including personal and residential
• Enter your total salary after you have deducted allowances spared under both tax regimes, like conveyance and tour
• Give salary details after exemption under the old regime, such as considering HRA, which is not granted in the new one
• If you have taken a loan for a home, enter details of paid interest on the self-occupied property
• Mention details of deductions allowed under new and old regimes, such as family pension deduction
• Enter exemptions or deductions not permitted under new tax such as 80C
• Finally, the calculator will offer calculations under new and old regimes to help pick the best option

When you decide on a specific regime, remember that you cannot opt out of it until the next financial year.

Summing Up

A tax calculator is a great tool introduced by the government to make tax calculations easier. If you’re looking for ways to manage finances, Ask.Fi can review your spending patterns and see your money grow. With the 360-degree view of your expenses, you can filter your spending by category and time. Moreover, through the Fi app, you can invest the money you save in Smart Deposits and commission-free mutual funds.

Frequently Asked Questions

1. Can a person make a choice between either the old or the new tax regime?

Though in the Budget 2023, the finance minister has announced the new tax regime as the default option, the choice to opt for the old tax regime still exists.

2. Is it better to switch to a new tax regime?

It is your personal choice which regime you choose. However, the new one is considered more beneficial if you have invested or spent less than INR 3,00,000.

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