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Income Tax Filing 2024: Which regime is beneficial to save tax, new or old, know the details

Income Tax Filing 2024: After the introduction of the new tax regime, taxpayers were given the option to choose between the old and new tax regimes. After this, the new tax system has been made default from the year 2024, that is, if you do not choose either of the two, then you yourself will come under the new tax system. The new tax system is beneficial for individuals with annual income above Rs 6 lakh. However, it can be complicated to determine which tax arrangement provides better benefits as it depends on individual financial goals and tax planning.

Factors affecting tax regime selection

Two primary factors play an important role in determining the most beneficial tax arrangement. What is your income and what are the eligible deductions? It is important to understand how tax liability and potential savings fluctuate based on these factors. According to Times Now, CA Divya Bhanushali, Chief Product Officer, TaxBuddy.com, said that it always depends on which category of income you belong to and what is your deduction amount, so one should consider the unavoidable expenses and investments. After doing this, tax liability should be assessed. Many taxpayers may be paying for certain essential expenses and investments that have tax benefits.

Tax for individuals earning Rs 6 lakh annually

Under the new tax regime, individuals with an annual income of Rs 6 lakh enjoy zero tax liability. In contrast, under the old tax regime, salaried individuals may have faced a tax liability of Rs 22,500 (excluding cess) if they did not avail any deduction except the standard deduction of Rs 50,000. However, many salaried taxpayers already have to pay zero tax under the old system by taking advantage of deductions. By using deductions like standard deduction of Rs 50,000 and Rs 50,000 under section 80C, taxpayers can bring their taxable income up to Rs 5 lakh, resulting in zero tax liability.

Comparison between New Tax Regime Vs Old Income Tax Regime

DetailsOld tax system with deductionsNew tax system
, annual incomeRs 6,00,000Rs 6,00,000
standard deductionRs 50,000Rs 50,000
Section 80C (Deduction on investment up to Rs 1.5 lakh)Rs 1,50,000 (maximum)0
total taxable incomeRs 4,50,000Rs 5,50,000
tax on excess incomeRs 10000 (up to Rs 2.5 lakh – 5% on BEL and above Rs 2 lakh)Rs 12500 (Up to Rs 2.5 lakh – 5% on BEL and above Rs 2 lakh)
Exemption under section 87ARs 10,000 (maximum Rs 12500)Rs 12500 (maximum Rs 25000)
final tax amountzerozero

 

CA Divya Bhanushali said that if individuals have income up to Rs 7 lakh and opt for the new regime, there will be no tax liability eligible for exemption up to Rs 25,000 under Section 87A.

Tax as per deduction

It is important to assess the deductions available to individuals earning more than Rs 6 lakh annually. Deduction under section 80C (up to Rs 1.5 lakh) and other deductions like HRA, interest on home loan and medical insurance premium have a significant impact on tax liability. When choosing between tax regimes it is important to evaluate which deductions are applicable and how they impact tax savings.

Effect of rising income levels

As income levels exceed Rs 6 lakh, the tax-saving potential under both regimes fluctuates. Whereas the new system offers easier and lower tax rates. Deductions play an important role in optimizing tax savings. Individuals earning more than Rs 6 lakh annually should carefully analyze their deduction eligibility.

Shyamu Maurya
Shyamu Maurya
Shyamu has done Degree in Fine Arts and has knowledge about bollywood industry. He started writing in 2018. Since then he has been associated with Informalnewz. In case of any complain or feedback, please contact me @informalnewz@gmail.com
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