Rs. 10 lakhs income, the new tax regime will tax Rs. 25,900 saves. However, if the deduction is maximized, the old regime benefits more
In the budget for the financial year 2024-25, the central government introduced changes in the new tax regime, including a standard deduction of Rs. 25,000 to Rs. 75,000 hike and revised tax slabs. However, the old tax regime remains in place, allowing taxpayers to continue to avail various deductions and exemptions.
For individuals with an annual income of 10 lakhs, careful consideration is required to determine the more beneficial regime.
Under the old tax regime, taxpayers could avail various sections like 80C (up to Rs 1.5 lakh), 80D (health insurance premium) and standard deduction (Rs 50,000).
Old tax system
- Total deduction: 2,25,000 Rs
- Taxable Income: Rs. 10,00,000 – Rs. 2,25,000 = Rs. 7,75,000
Tax Calculation:
- Up to 2.5 lakhs: zero
- Rs. 2.5 lakh to Rs. 5 lakhs: 5% = Rs. 12,500
- Rs. 5 lakh to Rs. 7.75 lakhs: 20% = Rs. 55,000
Total Tax: 67,500 Rs
Cess (4%): 2,600 Rs
Total Tax Payable: 70,100 Rs
New tax regime
The new tax regime has lower tax slabs, but no deductions and exemptions.
Taxable Income: Rs. 10,00,000 – Rs. 75,000 = Rs. 9,25,000
Tax Calculation:
- Up to 3 lakhs: Nil
- Rs. 3 lakh to Rs. 7 lakhs: 5% = Rs. 20,000
- Rs. 7 lakh to Rs. 9.25 lakhs: 10% = Rs. 22,500
Total Tax: 42,500 Rs
Cess (4%): 1,700 Rs
Total Tax Payable: 44,200 Rs
Comparison and conclusion
Old Regime Taxes: 70,100 Rs
New Regime Taxes: 44,200 Rs
If your annual income is Rs. 10 lakh, then the new tax regime will be Rs. 25,900 reduces the tax liability. However, if you are able to make the most of the deductions available under the old regime, it can be beneficial for you. Taxpayers should make the right choice based on their income, expenditure and investment plans. The new system is simpler, but the old system offers more exemptions.