New vs. Old Tax Regime: Choosing the right option post-budget 2024

In light of Finance Minister Nirmala Sitharaman's Budget 2024, the new income-tax regime has been further refined, offering more advantages to taxpayers. The recent changes make the new, simplified tax regime more appealing, particularly for those without substantial deductions.

Enhanced Benefits of the New Regime

The new regime now includes increased income-tax slabs and a higher standard deduction of Rs 75,000, up from Rs 50,000. For individuals who don’t claim significant deductions, such as home loan interest or house rent allowance (HRA), the new regime offers a more streamlined and potentially more beneficial option.

Old Regime: Best for High Deductions

The old tax regime remains advantageous for those who claim substantial deductions. For example, a salaried employee with an income of Rs 11 lakh can benefit from the old regime if they claim deductions exceeding Rs 3,93,750. While this level of deductions may be challenging to achieve for a single individual, couples with combined incomes might find it feasible. Similarly, individuals earning Rs 60 lakh will also find the old regime preferable if their deductions exceed Rs 3,93,750.

New Regime: A Favorable Choice for Low Earners and High Incomes

For taxpayers earning less than Rs 7 lakh, the new regime’s rebate ensures their tax liability is zero. Salaried individuals with incomes up to Rs 7.75 lakh will not face any tax due to the higher standard deduction. In contrast, under the old regime, the rebate limit is Rs 5 lakh, and the standard deduction remains at Rs 50,000.

High-income earners, such as those with earnings of Rs 6 crore, will also benefit from the new regime, which features a lower surcharge rate of 39% compared to the old regime's 42.74% for incomes exceeding Rs 5 crore.

Additionally, taxpayers who prefer to avoid the extensive paperwork and compliance associated with the old regime will find the new regime's simplicity advantageous.

The new income-tax regime, with its increased slabs and simplified structure, is generally beneficial for low and middle-income earners as well as high-income individuals due to lower surcharges. On the other hand, those with significant deductions may still find the old regime advantageous.