Old v/s new income-tax regime: Master the difference

The new income-tax regime has been made more lucrative. Under this, those with income up to 7 lakh a year need not pay tax. Standard deduction of 50,000 is available and concessional slab rates are available on income up to 15 lakh. However, to avail these rates, one has to forego exemptions such as HRA, LTA etc, deductions and losses (such as those arising against home loans). Under the old tax regime, by availing exemptions, deductions and losses, the net taxable income is reduced and such reduced income is subject to tax at applicable slab rates.

Rebate up to 25,000, under Section 87A, can be claimed by resident taxpayers if total income (after Chapter VIA deductions) does not exceed 7 lakh under the new tax regime. However, under the old tax regime, rebate up to 12,500 can be claimed if total income (after Chapter VIA deductions) does not exceed 5 Lakh. Standard deduction of 50,000 for all salaried taxpayers will now be available under both regimes. The new tax regime will now be the
default choice of the taxpayer and the old tax regime shall be completely ‘optional’. So which one is better? Those who avail of various exemptions, deductions and losses may be better off continuing under the old tax regime. However, those who do not pay house rent, have no home loan and do not avail any other exemptions or deductions could opt for the new tax regime.