Difference Between Old vs New Tax Regime

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Bharti Vasvani

Income Tax
Income Tax Filing
New Tax Regime
Old Tax Regime
Last updated on February 16th, 2023

The Finance Minister, Nirmala Sitharaman presented the Budget 2020 on the 1st of February 2020. Finance Minister had many major announcements including the introduction of the New Tax Regime.

The new tax regime was introduced to simplify taxes and reduce the burden of compliance on taxpayers. The major difference between both of these tax regimes is income tax slab rates as well as the ability to claim exemptions and deductions.

Even 2 years post the introduction of the New tax regime under section 115BAC, the majority of taxpayers filed their ITR under the old tax regime. Hence to promote this new regime in Union Budget 2023-24 the tax slabs were revised for the new regime along with other changes.

Tax Slab Rates

Under the New Regime, new tax slabs were introduced with existing rates which are slashed on income up to INR 15 Lakh. The tax slab rates as per the ‘New Income Tax Regime’ and ‘Old Income Tax Regime’ are as follows:

Income Range Rates as per Old Regime Rates as per New Regime
(up to AY 2023-24)
Up to INR 2,50,000 Nil Nil
INR 2,50,001 – 5,00,000 5% 5%
INR 5,00,001 – 7,50,000 20% 10%
INR 7,50,001 – 10,00,000 20% 15%
INR 10,00,001 – 12,50,000 30% 20%
INR 12,50,001 – 15,00,000 30% 25%
Above INR 15,00,000 30% 30%
Income RangeRates as per New Tax Regime
(AY 2024-25 onwards)
Up to INR 3,00,000Nil
INR 3,00,001 – 6,00,0005%
INR 6,00,001 – 9,00,00010%
INR 9,00,001 – 12,00,00015%
INR 12,00,001 – 15,00,00020%
Above INR 15,00,00030%

Basic Exemption Limit

Under the new tax regime, the basic tax exemption limit will remain the same for all assesses including senior citizens. Therefore, in case you opt for the new regime, there will be no higher tax exemption for the senior and super senior citizens.

 Age New Regime
Exemption Limit
(AY 2024-25 onwards)
New Regime Exemption Limit
(up to AY 2023-24)
Old Regime Exemption Limit
People Below 60 Years of Age INR 3,00,000 INR 2,50,000 INR 2,50,000
People Between 60 to 80 Years of Age INR 3,00,000 INR 2,50,000 INR 3,00,000
People Above 80 Years of Age INR 3,00,000 INR 2,50,000 INR 5,00,000

Changes in Deductions and Exemptions under the New Tax Regime

According to the announcement made in the Budget 2020, there have been major removals of tax exemptions and deductions. This has made tax compliance less tedious. Here is the list of what deductions have stayed and what deductions have been removed:

What is not covered in New Tax Regime What is covered in New Tax Regime

Leave Travel Allowance 

Income from Life Insurance

House rent allowance

Money received as a scholarship for education, etc.

Standard deduction of Rs 50,000 available for salaried individuals (up to AY 2023-24)

Leave encashment on retirement

Deductions available under Section 80TTA/TTB

Agricultural Income

Entertainment allowance deduction and professional tax ( For government employees)

Standard Deduction on Rental Income and Standard Deduction of INR 50,000 for Salaried individuals, pensioners and of INR 15,000 for family pensioners (AY 2024-25 onwards)

Tax relief on interest paid on home loan for self-occupied or vacant property u/s 24

Retrenchment compensation

Deduction of INR 15,000 from the family pension (Up to AY 2023-24)

VRS proceeds up to INR 5 lakhs

Tax-saving investment deductions under Chapter VI-A (80C,80D, 80E,80CCC, 80CCD, 80DD, 80DDB,, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) (Except, deduction under Section 80CCD(2), 80JJA, and 80CCH)

Death cum retirement benefit

Changes under Income from House Property in the New Tax Regime

Changes in Deductions on Home Loan interest – Section 24(b)

No claim of home loan Interest on Self Occupied House Property: Individuals who have taken a home loan on their self-occupied property and are paying interest on it, can not claim that interest deduction under Section 24(b).

A claim of home loan Interest on Rental House Property: Under the new income tax regime, individuals can claim interest on home loans for let-out property only up to the amount of their rental income declared under the head house property income.

The setting off of losses from house property income

As per the new income tax regime, losses from house property can only be set off against other income from house property. Moreover, losses from income from house property cannot be carried forward in the new income tax regime.

Deduction for first-time Homebuyers

Deduction u/s 80EE & Section 80EEA gives relief on interest paid on home loans for first-time home buyers. This deduction is no longer available for taxpayers following the new income tax regime.

New HP deductions

Deductions for business expenditure under New Tax Regime

Following deductions and exemptions not allowed for business income:

  1. Additional depreciation under section 32.
  2. Investment allowance under section 32AD
  3. Sector-specific business deductions under sections 33AB and 33ABA
  4. Expenditure on scientific research under section 35
  5. Capital expenditure under section 35AD
  6. Exemption under section 10AA for SEZ units

Setting-Off Business/Profession Loss

In the case of a business income, an individual/ HUF cannot set off the brought forward business loss or unabsorbed depreciation. Further, they cannot carry forward these B&P losses and unabsorbed depreciation relating to deductions/exemptions withdrawn under clause (i) of sub-section (2) of section 115BAC.

In simple terms, you can carry forward short-term & long-term capital losses and derivatives trading losses in the new tax regime. Since, only the losses relating to deductions & exemptions withdrawn under clause (i) of sub-section (2) of section 115BAC cannot be set off or carried forward, for eg: House property losses, additional depreciation, etc.

If an individual/HUF opts for new tax regime for FY 2020-21, then form 10-IE has to be filed to inform the tax department that one is choosing the new tax regime. As per the income tax laws, an individual having business income shall submit this form before the due date of filing ITR i.e. July 31 (unless extended by the government) if Tax Audit not applicable. Salaried individuals can opt for new regime without filing this form.
Tip
If an individual/HUF opts for new tax regime for FY 2020-21, then form 10-IE has to be filed to inform the tax department that one is choosing the new tax regime. As per the income tax laws, an individual having business income shall submit this form before the due date of filing ITR i.e. July 31 (unless extended by the government) if Tax Audit not applicable. Salaried individuals can opt for new regime without filing this form.

Comparison of Old and New Tax Regimes

There cannot be a straight answer to the question that which tax regime is better to opt for. It depends on each taxpayer’s situation and financial position.
Looking at the reduction in tax rates new system looks better but due to the non-availability of various deductions or exemptions, it is advisable to do a comparative evaluation under both regimes before you opt for the new regime or decide to continue with the old one.

Here are some examples of how much tax a person must pay in the old and new regimes without any exemptions for the same salary.

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A PERSON WITH AN ANNUAL INCOME OF INR 7,50,000

Suppose a person aged 45 years is having an income of INR 7,50,000 which includes INR 3,50,000 from Salary, INR 2,00,000 profit from trading, INR 50,000 Interest on FDs, and the remaining INR 1,50,000 dividend. He has made an investment of INR 1,50,000 under section 80C and INR 20,000 under section 80D.

Solution

The following table shows the tax calculation under different regimes:

 

Particulars Tax under Old Regime Tax under New Regime 
(up to AY 2023-24)
Tax under New Regime 
(AY 2024-25 onwards) 
Income from Salary INR 3,50,000 INR 3,50,000 INR 3,50,000
Less: Standard Deduction (INR 50,000) NA (INR 50,000)
Profit from Business & Profession INR 2,00,000 INR 2,00,000 INR 2,00,000
Income from Other Sources INR 2,00,000 INR 2,00,000 INR 2,00,000
Total headwise Income INR 7,00,000 INR 7,50,000 INR 7,00,000
Less: Deduction under                       chapter VI-A      
Section 80C Deduction (INR 1,50,000) NA NA
Section 80D Deduction (INR 20,000) NA NA
Net Taxable Income INR 5,30,000 INR 7,50,000 INR 7,00,000
Total Tax Liability INR 18,500 INR 37,500 INR 25,000
Less: Rebate u/s 87A NA NA (INR 25,000)
Health and education Cess 4% INR 740 INR 1,500 NA
Net Tax Payable (annually) INR 19,240 INR  39,000 NA

 

A PERSON WITH AN ANNUAL INCOME OF INR 20,00,000

Suppose a person aged 50 years is having an income of INR 20,00,000 which includes INR 16,00,000 from Salary, INR 2,00,000 profit from trading, INR 50,000 from Interest on FDs, and the remaining INR 1,50,000 dividend. He has made an investment of INR 1,50,000 under section 80C and INR 20,000 under section 80D.

Solution

The following table shows the tax calculation under different regimes:

 

Particulars Tax under Old Regime Tax under New Regime 
(up to AY 2023-24)
Tax under New Regime 
(AY 2024-25 onwards) 
Income from Salary INR 16,00,000 INR 16,00,000 INR 16,00,000
Less: Standard Deduction (INR 50,000) NA (INR 50,000)
Profit from Business & Profession INR 2,00,000 INR 2,00,000 INR 2,00,000
Income from Other Sources INR 2,00,000 INR 2,00,000 INR 2,00,000
Total headwise Income INR 19,50,000 INR 20,00,000 INR 19,50,000
Less: Deduction under                       chapter VI-A      
Section 80C Deduction (INR 1,50,000) NA NA
Section 80D Deduction (INR 20,000) NA NA
Net Taxable Income INR 17,80,000 INR 20,00,000 INR 19,50,000
Total Tax Liability INR 3,46,500 INR 3,37,500 INR 2,85,000
Less: Rebate u/s 87A NA NA NA
Health and education Cess 4% INR 13,860 INR 13,500 INR 11,400
Net Tax Payable (annually) INR 3,60,360 INR  3,51,000 INR 2,96,400

 

Moreover, Taxes on incomes taxable at special rates such as long-term and short-term capital gains will be the same in the new as well as old regime.

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This table below gives a broad idea about the tax slab based on the income range applicable up to AY 2023-24:

Old Vs New Tax Regime Comparison

Pros & Cons of New Tax Regime

FAQs

I am having two rented house properties. Can I claim interest on a loan taken for one property against rental income earned from both of them under the new tax regime?

Yes, you can claim an interest deduction against rental income earned from both of them under the new tax regime.

What if I forget to fill the new form?

If an individual forgets to fill the form i.e. Form 10-IE, at the time of filing ITR, then they may be disallowed the tax rates available under the new tax regime. The tax department will calculate their income tax liability based on the existing/old tax regime up to AY 2023-24. However as in Budget 2023 new regime is announced as default, from AY 2024-25 ITD shall process ITR under old tax regime if not specifically opted for old tax regime.

Got Questions? Ask Away!

  1. These year i will go for Old Tax Slab. since 80G & Other Stock Brokage Charges.
    But for Next Year i want to OPT For New Tax Slab as it is Best.

    But whatever My Loses in Short Term Capital Gain for these Year.
    Can i carry forward STCG Loses in New Tax Slab.

    Since these year i will use Old Tax Slab & Next Year i will Use New Tax Slab…

  2. Hi @Aadil_Nakhwa,

    Irrespective of any regime you’re opting for, you’re eligible to carry forward your short-term capital losses.

    Hope this helps.

  3. Hi

    Is deduction upto Rs.10,000/- on savings account, applicable under Sec 80TTA, available under the new tax regime, be it AY 2023-24 or 2024-25?

  4. Hi @gdshan,

    As per the Income Tax Act, deduction on savings account interest under section 80TTA is only available in the old tax regime.

    hence, if you opt for a new tax regime, you’re not eligible to claim such a deduction.

    Hope it helps.

  5. Hi

    Thanks for clarifying.