Filing your income tax return is not just about disclosing income details and submitting the form; it's also about making the right choice when it comes to tax regimes. Many taxpayers often get confused between the old and new tax regimes.
Calculate your tax liability under both the old tax regime and the new tax regime before opting for the option best suited to your income.
The first step is to calculate your total income for the financial year. Add income from all sources, including salary, interest earned from savings account, fixed deposits, rental income, business income or any other taxable income.
After that, the next step is to calculate the tax payable under both the old tax regime and the new tax regime. This will help you understand which option can save you more money.
ALSO READ | Filing ITR Now? Don't Hit 'Submit' Before Checking These Details
How to calculate tax under old regime
Salaried employees and pensioners can claim a standard deduction of Rs 50,000.
You can claim benefits such as:
- Section 80C: Up to Rs 1.5 lakh deduction for investments like PPF, EPF, ELSS, life insurance premium and home loan principal repayment.
- Health insurance deduction: Under Section 80D.
- HRA exemption: If you receive House Rent Allowance and meet eligibility conditions.
- Home loan interest deduction: For eligible taxpayers.
- NPS contribution deduction: Under applicable sections.
Income tax slabs
- Up to Rs 2.5 lakh- No income tax
- Rs 2.5 lakh to Rs 5 lakh- 5% income tax
- Rs 5 lakh to Rs 10 lakh- 20% income tax
- Above Rs 10 lakh- 30%
How to calculate tax under new regime
Under the new regime, deductions such as 80C, HRA and home loan benefits are not available. However, salaried taxpayers can claim a standard deduction of Rs 75,000.
Income tax slabs
- Up to Rs 4 lakh- No income tax
- Rs 4 lakh to Rs 8 lakh- 5% income tax
- Rs 8 lakh to Rs. 12 lakh- 10% income tax
- Rs 12 lakh to Rs 16 lakh- 15% income tax
- Rs 16 lakh to Rs 20 lakh- 20% income tax
- Rs 20 lakh to Rs 24 lakh- 25% income tax
- Above Rs 24 lakh- 30% income tax
ALSO READ | ITR Filing: Your Last-Minute Guide To File Returns Without Errors And Avoid Tax Notices
Which one should you choose?
The new tax regime has lower tax rates and a higher standard deduction, which means many taxpayers may pay less tax without claiming several exemptions.
The old tax regime has higher tax rates, but it allows taxpayers to reduce their taxable income by claiming various deductions and exemptions.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.