I am a salaried employee and have always opted for the old regime. I have a home loan on which I claim the interest every year and also claim the 80C deduction by investing in PPF and ELSS. But now many people are suggesting to switch to new regime. Should I let go of my interest deduction? Which regime will be more beneficial in my case?
As the tax slabs and rates were revised again under the new tax regime, this is a common question that people have.
See, with the new tax slabs, the gap between the old and new regime has widened. Earlier, deductions like 80C (ELSS, PPF, Life insurance premium) and 80D (Health insurance premium) were enough to make the old regime beneficial but, they will not suffice now.
Moreover, the tax rebate is also higher in the new regime where income up to ₹12L becomes tax-free whereas this limit is just ₹5L under the old regime.
So, you need to assess what amount of deductions will help you save more tax under old regime at your income level. Here’s a table that lists down the break-even points for various income levels.
| Gross salary | Tax under new regime (in ₹) | Tax under old regime (in ₹) | Deduction amount needed to break-even (in ₹) |
|---|---|---|---|
| ₹5 lakh | 0 | 0 | 0 |
| ₹7 lakh | 0 | 44,200 | 1,50,000 |
| ₹10 lakh | 0 | 1,06,600 | 4,50,000 |
| ₹12 lakh | 0 | 1,63,800 | 6,50,000 |
| ₹13 lakh | 26,000 | 1,95,000 | 6,87,500 |
| ₹14 lakh | 81,900 | 2,26,200 | 5,18,750 |
| ₹15 lakh | 97,500 | 2,57,400 | 5,43,750 |
| ₹16 lakh | 1,13,100 | 2,88,600 | 5,68,750 |
| ₹17 lakh | 1,30,000 | 3,19,800 | 6,08,333 |
| ₹18 lakh | 1,51,200 | 3,51,000 | 6,41,666 |
| ₹19 lakh | 1,70,000 | 3,82,200 | 6,74,999 |
| ₹20 lakh | 1,92,400 | 5,10,400 | 7,08,333 |
| ₹21 lakh | 2,14,500 | 4,44,600 | 7,31,499 |
| ₹22 lakh | 2,40,500 | 4,75,800 | 7,54,166 |
| ₹23 lakh | 2,66,500 | 5,07,000 | 7,78,833 |
| ₹24 lakh | 2,92,500 | 5,38,200 | 7,87,500 |
| ₹25 lakh | 3,19,800 | 5,70,400 | 8,00,000 |
| ₹27 lakh | 3,82,200 | 6,33,800 | 8,00,000 |
| ₹30 lakh | 4,75,800 | 7,25,400 | 8,00,000 |
*We have considered standard deduction (₹75,000 under new regime and 50,000 under old regime) while calculating the tax liability.
You simply need to check the break-even point against your income level, and see:
- If your total deductions > break-even point —> old regime will be beneficial.
- If your total deductions < break-even point —> new regime will be beneficial.
Hope this helps!
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3 major deductions under old scheme are:
- HRA recd when certain leverl of rent is actually paid
- Interest on housing loan
- Deduction u/s 80C, D, TTB ( can go upto 2.5 lakhs for senior citizens)