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Choosing between the new tax regime and the old tax regime has been a major point of confusion for many taxpayers this financial year. The government has introduced several attractive changes to the new regime to encourage adoption, but is it really the best choice for you?
The Old Tax Regime
The old tax regime allows you to claim over 70 exemptions and deductions, including HRA, LTA, and Section 80C deductions up to ₹1.5 Lakhs. If you have significant investments, a home loan, or high medical insurance premiums, the old regime often results in a lower overall tax liability.
The New Tax Regime
The new tax regime offers lower tax rates across different income slabs but requires you to forego most exemptions and deductions. Notably, the basic exemption limit has been increased, and a standard deduction of ₹50,000 is now available for salaried individuals.
For individuals earning up to ₹7.5 Lakhs (including the standard deduction), the new tax regime essentially reduces your tax liability to zero.
Which one should you choose?
The decision mathematically boils down to the total deductions you are eligible to claim. As a general rule of thumb: Always consult with a qualified Chartered Accountant to run a personalized comparative calculation before filing your returns.