I was filing under the old regime till last year. This time the tax slabs are revised under the new regime again. I have investments in ELSS funds, have a health insurance premium as well. Will the changed slabs affect my tax liability? Should I go for the new regime?
Yes, the tax slabs under the new regime were revised in Union Budget 2024 and the standard deduction was increased to ₹75,000. Now, for people falling into the highest tax bracket of 30%, this meant a reduced tax liability of up to ₹17,500.
Hence, you’ll have to once again compare the tax liability under both regimes after considering all the deductions that you are eligible to claim.
To begin with, let’s look at the revised slabs under the new regime.
While these tax rates are significantly lower than the old regime, there are several deductions that the old regime allows, and thus, may result in a lower tax liability.
Hence, the question comes to whether you have enough deductions under the old regime to the point that they can outweigh the reduced rates under new regime.
In most cases, deductions with lower limit will not make much of a difference, but those like home loan interest, HRA and education loan would be important ones to look out for.
Now don’t worry, you don’t have to calculate everything manually, here’s a quick cheat sheet for you:
- Total deductions < ₹2.75 lakh: go for new regime
- Total deductions > ₹4.83 lakhs: go for old regime
- Total deductions are between ₹2.75 to ₹4.83 lakhs: refer to the table below
Hence,
- if deductions > breakeven point, old regime is better, and
- if deductions < breakeven point, new regime is better.
Note: The above calculations are valid only if your total income includes salary income.
Also remember that salaried professionals with total income up to ₹7.75L would have to pay no taxes under the new regime. This is because you get a standard deduction of ₹75,000 and a tax rebate as well. So opting for the new regime becomes a no brainer in this case.
Moreover, some deductions are even allowed under the new tax regime and you should take them into account when calculating your tax liability. Here’s a list.
Hope this helps you out!
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