Which is Better New or Old Tax Regime for Salaried Employees

Remember the new tax regime of 2020? Well, if you brushed it away, now must be a good time to revisit.

2023’s union budget revised the new tax regime to encourage it over the existing one. Although the old tax regime stays in the picture, the incentives of the new one seem fulfilling too.

Are you trying to weigh between the income tax old regime vs new regime ? Well, let us help you understand the old and new tax regime . Compare and pick the best one based on your income.

What is Old and New Tax Regime ?

With 2023's union budget revamping the new tax regime, it has become the default choice for salaried employees. However, you can opt for the old regime if it fits your goals.

Let’s understand the old and new tax regime.

New Tax Regime

2020’s new tax regime lost support because of its deductions and exemption limits. But, 2023’s budget improvised to persuade a shift into this regime.

• Increased tax rebate limit: the previous taxable income margin started from ₹5 lakh, which is now ₹7 lakh. This means employees earning under ₹7 lakh can have a tax-free income.
• Simplified tax slab: Increased slab rates mean lower and simpler rates. The current tax slab rates include the following:

• Standard and family pension deduction: The new regime includes the ₹50,000 standard deduction, like the old regime. Plus, it offers deductions to family pensioners too.

Old Tax Regime

The older regime tops because of the over 70 various deductions. Among these, the 80C offering a reduction of ₹1.5 lakhs on taxable income, HRA, and LTA, are most popular.

These are the offered exemptions:

• LTA (Leave Travel Allowance)
• HRA (House Rent Allowance)
• ₹50,000 standard deduction
• Interest on savings account deductions
• Entertainment allowance for government employees
• ₹15,000 deductions on family pensions

Hence, this plan reduces the total taxes paid on income.

Income Tax Old Regime vs New Regime : Which is Better?

Now that you know what is old and new tax regime are, it is time to compare the two. Listed below are the advantages and limitations of the income tax old regime vs new regime:

Hence, both the old and new tax regime have their pros and cons. The best regime for you depends solely on previous personal eligibility for exemptions and deductions. Evaluate, compare, and assess the best based on your income and financial preferences.

Summing Up

With both the old and new tax regime in the picture, it is time for salaried employees to assess their financial decisions. The two differ in income tax slab rates, certain deductions, and exemptions.

While you take a deeper look at the income tax old regime vs new regime analysis, let Fi Money help you analyse.

With Ask.Fi , you 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 salaried person choose new tax regime?

Yes. The new tax regime has now become the default choice. This change can be made when filling ITR (Income Tax Return).

2) Who should prefer the new tax regime?

Essentially, people with an annual income of up to ₹7 lakhs benefit immensely under the new tax regime. They are eligible for a tax-free income. Besides, people with higher incomes but overall low investments also benefit from lowered tax slabs.

‍