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Filing Income tax returns: Check out the Slab Rates and Deductions for Old and New Tax Regimes

20 June 20246 mins read by Angel One
This article provides a comprehensive guide on income tax slab rates and deductions for both old and new tax regimes, helping you make informed decisions when filing your ITR.
Filing Income tax returns: Check out the Slab Rates and Deductions for Old and New Tax Regimes
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As the Income Tax filing deadline approaches on July 31, 2024, it’s crucial for taxpayers to understand the intricacies of ITR filing, including income tax slab rates and deductions under both old and new tax regimes. With the right knowledge, you can optimise your tax returns and ensure compliance with the latest regulations. This comprehensive guide on income tax slab rates and deductions for both old and new tax regimes will help you make informed decisions when filing your ITR.

Understanding the ITR Filing Process

Income Tax Return (ITR) filing is an essential annual task for all taxpayers. Whether you are an individual or part of a Hindu Undivided Family (HUF), understanding the different income tax slab rates and available deductions can significantly impact your tax liability. The Government of India introduced the new tax regime as an optional alternative to the old tax regime starting from the financial year 2020-21. This move aimed to provide more flexibility and choice in managing tax obligations. In the Union Budget for the financial year 2023-24, Finance Minister Nirmala Sitharaman announced that the new tax structure would become the default regime. However, taxpayers can still opt for the old tax regime if it better suits their financial situation.

Income Tax Slab Rates: Old vs New Tax Regime

To understand how the tax liabilities differ between the old and new tax regimes, let us take an example of a salaried person with a taxable income of Rs 1 crore.

New Tax Regime

Total Income (upto Rs) Rate of Tax Taxable income on particular slab Salary amount x Tax rate Tax payable on slab (Rs)
upto 3 lakhs Nil 3 lakhs out of the 1 crore 3 lakhs*Nil 0.00
3 lakhs to 6 lakhs 5% 3 lakhs out of the remaining 97 lakhs 3 lakhs*5% 30,000.00
6 lakhs to 9 lakhs 10% 3 lakhs out of the remaining 94 lakhs 3 lakhs*10% 90,000.00
9 lakh to 12 lakh 15% 3 lakhs out of the remaining 91 lakhs 3 lakhs*15% 1,80,000.00
12-lakh to 15 lakhs 20% 3 lakhs out of the remaining 88 lakhs 3 lakhs*20% 3,00,000.00
15 lakhs and above 30% Have to pay taxes on remaining 85 lakhs 85 lakhs*30% 25,50,00,000.00
Total tax paid on a yearly salary of Rs 1 crore 25,56,00,000.00

Old Tax Regime

Total Income (upto Rs) Rate of Tax Taxable income on particular slab Tax paid on slab Tax payable on slab (Rs)
upto 2.5 lakh Nil 2.5 lakhs out of the 1 crore 2.5 lakhs*Nil 0.00
2.5 lakhs to 3 lakhs 5.00% 0.5 lakh out of the 97.5 lakh 0.5 lakh*5% 2,500.00
3 lakhs to 5 lakhs 5.00% 2 lakh out of the 97 lakh 2 lakhs*5% 10,000.00
5 lakh to 6 lakh 20.00% 1 lakh out of the 95 lakh 1 lakhs*20% 20,000.00
6 lakh to 7.5 lakhs 20.00% 1.5 lakh out of the 94 lakh 1.5 lakhs*20% 30,000.00
7.5 lakh to 9 lakh 20.00% 1.5 lakh out of the 92.5 lakh 1.5 lakhs*20% 30,000.00
9 lakh to 10 lakh 20.00% 1 lakh out of the 91 lakh 1 lakhs*20% 20,000.00
10 lakh to 12 lakh 30.00% 2 lakh out of the 88 lakh 2 lakhs*30% 60,000.00
12 lakh to 12.5 lakh 30.00% 0.5 lakh out of the 87.5 lakh 0.5 lakhs*30% 15,000.00
12.5 lakh to 15 lakh 30.00% 3 lakh out of the 9 crore 3 lakh*30% 90,000.00
15 lakh and above 30.00% Have to pay taxes on remaining 84.5 lakh 84.5 lakhs*30% 25,35,000.00
Total tax paid on a yearly salary of Rs 1 crore 28,12,500.00

From the example above, a salaried person with Rs 1 crore of income per annum has to pay approximately 25.56% of their income as taxes to the government under the new regime, whereas they would have to pay slightly more under the old regime, about 28.13%.

Please note that these figures are indicative, as additional cess and surcharges may increase your tax liability, while deductions can reduce the final amount paid.

Deductions and Exemptions Under the New Tax Regime

While the new tax regime does away with most exemptions and deductions, a few remain available to taxpayers. Some of the notable exemptions include Transport Allowances for Persons with Disabilities (PwD), Conveyance Allowance, Travel/Tour/Transfer Compensation, Exemptions for Voluntary Retirement Scheme under Section 10(10C), Gratuity Amount under Section 10(10), Leave Encashment under Section 10(10AA), and Deductions on Deposits in Agniveer Corpus Fund under Section 80CCH(2).

Deductions and Exemptions Under the Old Tax Regime

The old tax regime offers numerous tax exemptions and deductions, allowing taxpayers to significantly reduce their taxable income. Commonly claimed exemptions and deductions include House Rent Allowance (HRA), Leave Travel Allowance (LTA), and deductions under Sections 80C, 80D, 80CCD(1b), and 80CCD(2), among others.

Choosing Between the Old and New Tax Regimes

When deciding between the old and new tax regimes, it is important to consider your financial situation, income levels, and available deductions. The new tax regime’s simplified structure may benefit those with fewer deductions, while the old tax regime could be advantageous for those who can claim multiple exemptions and deductions. By deducting all eligible exemptions and deductions, the net taxable income can be determined. Calculating the tax liability based on this net taxable income under the old tax regime allows for a comparison with the tax liability under the new tax regime. Choosing the regime with the lower tax liability is the logical approach, and it is essential to inform the employer about this choice so that the appropriate Tax Deducted at Source (TDS) can be deducted from the salary.

If you have a loss from house property, capital gains, or business and profession, you need to consider them as well while making informed decisions on the selection of the regime. The ineligibility to carry forward such losses may impact your future income determination and taxes thereon.

Conclusion

Filing your ITR correctly and efficiently is crucial for staying compliant with tax laws and maximising your savings. By understanding the differences between the old and new tax regimes, including their respective income tax slab rates and deductions, you can make an informed decision that best suits your financial needs. As the deadline approaches, ensure you review your options and choose the regime that offers the most benefits for your specific circumstances.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

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