In 2020 Finance Law introduced a new tax system with different income tax rates for different income brackets compared to the existing tax system. Taxpayers can choose between the old tax regime and the new tax regime. This article is intended to Income tax slab old vs new help you decide which income tax option is better for you.
It is important to have a good understanding of both tax systems in order to determine which income tax bracket is better, the old or the new. Knowing what your current control panel is will help you determine if a new control panel is beneficial.
What Is Income Tax Slab New and Old
Taxes are levied at different rates depending on the taxpayer’s income. rates vary depending on the income category. The law defines these brackets and corresponding tax rates. Such groupings are called income tax slabs.
Here is the income tax slab for the financial year 2022-23 under both the New Tax Regime and the Old Tax Regime under the age of 60. Let’s see.
| Net Taxable Income | Income Tax Slab Rates (FY 2022)under the New Tax Regime | Income Tax Slab Rates (FY 2022)under the Old Tax Regime |
| Up to Rs 2.5 lakh | Exempt | Exempt |
| Rs 2,50,001 to Rs 5 lakh | 5% | 5% |
| Rs 5,00,001 to Rs 7.5 lakh | 10% | 20% |
| Rs 7,50,001 to Rs 10 lakh | 15% | 20% |
| Rs 10,00,001 to Rs 12.5 lakh | 20% | 30% |
| Rs 12,50,001 to Rs 15 lakh | 25% | 30% |
| Over Rs. 15 lakh | 30% | 30% |
Income Tax Slabs FY 2022-23 both the New Tax Regime and the Old Tax Regime for Senior Citizen Taxpayers
In India, senior citizen taxpayer is between the ages of above 60 and below 80. These taxpayers enjoy a higher basic exemption of Rs 300,000 compared to under-60 taxpayers under the old tax regime. However, senior taxpayers who choose the new tax regime will not be able to benefit from higher tax reliefs. The following table summarizes (FY2022-23) income tax rates for seniors in India.
| Net Taxable Income | Income Tax Slab Rates (FY 2022)under the New Tax Regime | Income Tax Slab Rates (FY 2022)under the Old Tax Regime |
| Rs 2,50,001 to Rs 3 lakh | Nil | Nil |
| Rs 3,00,001 to Rs 5 lakh | 5% | 5% |
| Rs 5,00,001 to Rs 7.5 lakh | 10% | 20% |
| Rs 7,50,001 to Rs 10 lakh | 15% | 20% |
| Rs 10,00,001 to Rs 12.5 lakh | 20% | 30% |
| Rs 12,50,001 to Rs 15 lakh | 25% | 30% |
| Over Rs. 15 lakh | 30% | 30% |
What Is Difference between Old and New Tax Regimes
Income tax slab old vs new. Certain financial instruments are available to claim tax credits under the relevant section of the Income Tax Act (eg Section 80C life insurance). This encourages savings and insurance while reducing the tax burden. In addition, Section 10 of the Act exempts certain incomes to reduce tax liability. The new tax slab has brought some changes here. The old tax slab allowed 120 exemptions, while the new tax system eliminated 70 exemptions and retained the remaining 50.
there are some popular known exemptions and deductions that have been removed under the new tax regime including :
- Allowance of leave travel
- House rent subsidy
- Standard deduction of ₹50,000 (salaried employees)
- Deduction of Interest on Savings Account Deposits Under Section 80TTA/TTB.
- Some tax relief measures under Chapter VI-A include subsections of Section 80, such as the popular Section 80C. These include well-known investments such as premiums, the Public Provident Fund (PPF), the National Pension schemes (NPS), and the ELSS (Equity Linked Savings schemes).
- Section 24 will relieve on interest paid on the home loan.
Similarly, below is a list of some well-known exemptions valid under the new tax regime.
- Income from life insurance.
- income of agriculture.
- Standard deduction from rent.
- Leave redemption when you retire.
- Earnings up to ₹500,000 under Voluntary Retirement Scheme (VRS).
Who Gets Benefits from New Tax Regime
Also, Individuals with low deductions in the Rs 5-10 lakh income bracket will benefit from the new scheme. In contrast, a high-income tax rate individual whose annual income exceeds Rs 15 lakh can benefit more from the existing scheme by making tax-saving investments.
How Is New Slab Tax Calculated
From 2020 to 2021, the government will allow individual taxpayers to choose between two tax regimes, the old tax regime or the new tax regime, to pay their taxes. The new income tax system gives individuals the freedom to continue with the old tax system if they choose.
If you are choosing a new tax system, taxpayers must forgo certain deductions and exemptions that were permitted under the old tax system and available if the old tax system were retained.
The new tax regime only provides for deductions under Section 80CCD(2). This means that the employer’s contribution to the employee’s National Pension Scheme (NPS) is deducted from the employee’s annual income. Under both the old and new schemes, a basic exemption limit of Rs 2.5 lakh applies to both schemes.
What Is the Benefit in New Tax Regime
The new regime offers reduced tax rates and compliance and most of the exemptions and deductions are not available, you’ll need less documentation, making tax filing easier. In addition, reduced tax rates provide more disposable income to individuals who could not invest in certain commodities for certain financial or personal reasons. As such, it provides taxpayers with more liquidity and the flexibility to customize their investment decisions.
Investors may not wish to have their funds tied up in a specified commodity for a specified period of time.
Under the new regime, all taxpayers will be treated equally as deductible/deductible benefits will affect their tax liability. This is especially useful for taxpayers who may not have subscribed to certain forms of investment, as most of these investments have lock-in periods. Instead, they can invest in perpetual commodities that offer superior returns and the flexibility of faster payouts.
Frequently Asked Questions (FAQs):-
Is 80C removed in new tax slab?
No, unlike the old/existing tax rate system, the new tax rate regime does not allow many deductions or exclusions. Section 80C deductions are not available if the taxpayer elects the reduced rate of the new regime.
Is there 50000 standard deduction in new tax regime?
The standard deduction is a flat deduction of INR 50,000 for individuals receiving a salary or retirement income under a salary heading, regardless of personal expenditures or investments. From 2020 to 2021, you can claim this deduction if you opt for the old tax regime.
Is new or old tax slab better?
Income tax slab old vs new. Taxpayers with an annual income from RS. 5 lakhs to Rs.10 lakhs. Under the old regime, 10 lakhs are taxed at a rate of 20%. And they are taxed at half price
Is there any exemption in new tax regime?
Yes, you can apply for tax exemption for travel allowances, especially for people with disabilities. Travel expenses that cover travel expenses incurred as part of the employment.
Conclusion
Now as you know about the income tax slab old vs new. Both systems have their advantages and disadvantages. The old system has many exceptions and deductions in many sections. Among them was the need for people to invest in tax-saving investment options, which helped in good investment habits. On the other hand, the new system will give people more flexibility and try to simplify the process.