Income tax is levied on individuals, HUFs, partnership firms, LLPs, and corporations as per Income Tax Act. If an individual’s income exceeds the minimum threshold limit, they are subject to a slab system of taxation. Here is a comparison of the tax slabs of the old regime and new regime –

Annual Income (₹)	Tax under Old Regime (%)	Annual Income (₹)	Tax under New Regime (%)
0 – 2,50,000	0%	Up to 3,00,000	0%
2,50,000 – 5,00,000	5%	3,00,000 – 6,00,000	5%
5,00,000 – 10,00,000	20%	6,00,000 – 9,00,000	10%
10,00,000 & above	30%	9,00,000 – 12,00,000	15%
		12,00,000 – 15,00,000	20%
		Above 15,00,000	30%

As you can see, there are more income slabs in the new regime and the tax rates are same for certain amounts and different  for others. For example, ₹6,00,000 is taxed at 20% in the old regime and at 10% in the new regime and ₹15,00,000 is taxed at 30% in both regimes. There are some different conditions which can lead to benefits or drawbacks depending on your income, investments and whether you want to claim deductions and exemptions. 

Salaried taxpayers can choose the new tax regime at the beginning of FY 2023-24. They cannot change their choice anytime during the financial year but can change their choice of tax regime for the next financial year. On the other hand, non-salaried taxpayers have limited flexibility. Once they opt out of the new tax regime, they cannot opt-in again for the new tax regime in the future.

Choosing between the old and new tax regime depends on the salary and the total amount of deductions and exemptions you get in the tax regime you select.

Let us see some examples

Salaried Individual – Income – ₹8,00,000

Harish N is a 40 year old salaried individual with a monthly salary of ₹8,00,000. Let us assume he has investments and contributions in 80C, 80CCD(1B) and 80D which amount to ₹2,50,000 and his HRA exemption is ₹10,000.

Under the old regime –

He would be eligible for standard deduction	₹50,000
His taxable income will be (₹8,00,000 – ₹2,50,000-₹10,000-₹50,000).	₹4,90,000
Tax payable will be	₹0

If Harish utilizes only the maximum available deductions of Section 80C i.e. ₹1,50,000, let us see his tax outgo –

He would be eligible for standard deduction	₹50,000
His taxable income will be (₹8,00,000 – ₹1,50,000-₹50,000)	₹6,00,000
Tax payable will be	₹33,800

Under the new regime

He would be eligible for standard deduction	₹50,000
His taxable income will be (irrespective of investments and/or contributions)	₹7,50,000
Tax payable will be	₹ 31,200

Here is a table that shows the salary (assuming salary = total income) and the deduction amount required to reduce tax outgo in the old regime. If the deductions are less than the amount indicated, it may make more sense to opt for the new regime.

Salary	Maximum Deductions/Contributions for tax outgo in old regime < tax outgo in new regime
₹5,00,000	Does not matter (Tax is nil in both old and new regimes)
₹10,00,000	Equal to or greater than ₹3,00,000
₹20,00,000	Equal to or greater than ₹4,25,000

Income Tax Old vs New Tax Regime: Which Scheme is More Beneficial

Both systems have pros and cons. The old system has exemptions and deductions which inculcates the habit of regular investing. The new system gives more flexibility and you can choose to invest such that you optimize your overall savings and returns.

Here is a comparison of some of the major deductions and exemptions available in the old regime and new regime –

Irrespective of the regime you choose, it is critical to plan your taxes at the beginning of the financial year so that they are aligned with your financial goals.