Comparison of New Tax Regime Vs Old Tax Regime

The Union Budget 2020 introduced a new personal tax regime for individual
taxpayers with lower tax rates. However, the option for such concessional tax
regime (New regime) requires the taxpayer to forego various tax exemptions and
deductions, which they were claiming in the old tax regime.

In Union Budget 2023, there has been some changes made in case of new tax
regime and the same has been mentioned here for your easy references:

1. The New Tax Regime is now default tax regime. As per income tax
provision employee needs to choose the Tax regime at the start of every
financial year and if employee has not chosen it, then tax will be deducted
according to new tax regime.

2. Standard deduction u/s 16(i) of INR 50000 will now be available in new
tax regime also. Earlier it was only available in case of Old Tax regime.

3. Tax Rebate u/s 87A is available up to income of Rs 7 lacs in New Tax

regime while it is up to Rs.5 lacs in Old Tax Regime. Earlier it was
available up to income of Rs 5 lacs in both the tax regimes.

4. Highest Surcharge under New Tax regime for employees earning more
than 5 Crores has been reduced from37%to25% while
t h e r e i s n o change in surcharge rates in old Tax regime.

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Below is the list of some commonly exemptions and deductions, which are
not available in the new tax regime:

1. House Rent Allowance u/s 10 (13A)

2. Leave travel allowance
3. Children Education and Hostel Allowance
4. Uniform and Washing Allowance
5. Helper Allowance
6. Interest paid on Housing loan
7. Investments under Sec 80C: Rs 1.5 lakh
8. Employee’s contribution to NPS: Rs 50,000
9. Medical insurance premium: Rs25,000/- for Self, Spouse and Children and
another Rs.25,000/- for parents (Rs.50,000/- for senior citizens)
10. Expenses incurred on the medical treatment, training or rehabilitation of a
disabled dependent: Rs.75000/- ( Rs.125000/- for the person with severe
disability )
11. Treatment of self or dependent for specified disease: Rs40,000/-
(Rs.1,00,000/- for senior citizens)
12. Interest on Education Loan
13. Donation paid to some specified institutions.
14. Savings Bank Interest: Rs 10,000 under Sec 80TTA
15. Disability of self: Rs.75,000/- to Rs.1,25,000/- depending on disability

A-47, (LGF), Hauz Khas, New Delhi – 110016 Phones: +91 11 41655400
C-43 Sector 8, Gautam Budh Nagar (NOIDA) – 201301 Phones: +91 120 4049100
102 Wellington Business Park – I, off Andheri Kurla Road,Marol, Andheri East, Mumbai - 59 Phones:+91 22 40574000
1260, B Wing,14TH Floor, Mittal Tower, M.G. Road, Bangalore-560001 Phones: +91 80 41509137
 Applicable Tax Rates under Old and New Tax Regime

Old Tax Regime New Tax Regime

Income (in Rs.)
Option 1 Option 2
Up to 2.5 lacs Nil Nil
2.5 – 3 lacs 5% Nil
3 – 5 lacs 5% 5%
5 – 6 lacs 20% 5%
6 – 9 lacs 20% 10%
9 – 10 lacs 20% 15%
10 – 12 lacs 30% 15%
12 – 15 lacs 30% 20%
Above 15 lacs 30% 30%

Applicable Surcharge under Old and New Tax Regime

Old Tax Regime New Tax Regime

Income (in Rs.)
Option 1 Option 2
Up to 50 lacs Nil Nil
50 lacs-1 Crore 10% 10%
1 Crore-2 Crore 15% 15%
2 Crore-5 Crore 25% 25%
Above 5 Crore 37% 25%

Health and Education Cess will be 4% of Income tax and Surcharge in both the Tax
regimes

A-47, (LGF), Hauz Khas, New Delhi – 110016 Phones: +91 11 41655400
C-43 Sector 8, Gautam Budh Nagar (NOIDA) – 201301 Phones: +91 120 4049100
102 Wellington Business Park – I, off Andheri Kurla Road,Marol, Andheri East, Mumbai - 59 Phones:+91 22 40574000
1260, B Wing,14TH Floor, Mittal Tower, M.G. Road, Bangalore-560001 Phones: +91 80 41509137
The New Tax Regime has proposed lower income-tax rates, for income segments
up to Rs 15 lakh but you also need to remember that the proposed lower tax rates
will be applicable only if you are willing to give up various exemptions and
deductions, which are available in the Old tax regime under various provisions of
the Income-tax Act, 1961.

This means that when you opt for the New Tax Regime, you will have to forgo some
important exemptions such as Leave Travel Allowance (LTA), House Rent Allowance
(HRA), etc. and deductions available under chapter VI A of the Act that grant
deductions under Section 80 [such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE,
80G, 80GG, 80GGA, 80GGC, etc. This also includes deduction on interest home loan,
under Section 24(b).

Only the deduction under Section 80CCD(2) [i.e., employer’s contribution on

account of an employee in a notified pension scheme] and Section 80JJAA
[i.e. for new employment] can be claimed.

SGC Opinion

To check which regime is beneficial, each individual will have to make his or her
own calculations because it actually depends on the level of deductions and
exemptions everyone is claiming. New income tax structure has its own benefits
and drawbacks depending on how much an individual earns annually. While some
people have welcomed the new income tax regime, others are confused whether
they should switch to the new tax structure or stay put under the existing regime.

A-47, (LGF), Hauz Khas, New Delhi – 110016 Phones: +91 11 41655400
C-43 Sector 8, Gautam Budh Nagar (NOIDA) – 201301 Phones: +91 120 4049100
102 Wellington Business Park – I, off Andheri Kurla Road,Marol, Andheri East, Mumbai - 59 Phones:+91 22 40574000
1260, B Wing,14TH Floor, Mittal Tower, M.G. Road, Bangalore-560001 Phones: +91 80 41509137
Hence, we at SGC have provided a Tax Calculator on our website, which will help
the employees to calculate the tax on their salaries under both the options so that
they can choose the option suitable for them:

As employee can choose his option with the employer only once in any
particular financial year and will not be able to get it changed thereafter. So
we advise every employee to choose the option very carefully after checking
your tax liability properly. However, employee will have a final choice to
choose his/ her final option at the time of filing his/her ITR. Therefore, you
can change your option at that time

The new income tax rate is beneficial for people with low investments. It offers
seven lower tax slabs. Anyone paying taxes without claiming
exemptions/deductions under the existing system can benefit from paying a lower
upfront rate of tax. Therefore, if you invest less in tax-saving schemes and not
claiming house rent and interest on housing loan deduction then you can go for
the new regime.

it is an optional scheme, so people have the flexibility to switch over from one
system to another after evaluation for the last year. However, a taxpayer can only
switch from the old system to the new one if he/she has no income from a business
or businesses. This offers better flexibility to taxpayers to choose a different tax
regime as per their requirement.

A-47, (LGF), Hauz Khas, New Delhi – 110016 Phones: +91 11 41655400
C-43 Sector 8, Gautam Budh Nagar (NOIDA) – 201301 Phones: +91 120 4049100
102 Wellington Business Park – I, off Andheri Kurla Road,Marol, Andheri East, Mumbai - 59 Phones:+91 22 40574000
1260, B Wing,14TH Floor, Mittal Tower, M.G. Road, Bangalore-560001 Phones: +91 80 41509137