The choice between the Old and New Tax Regime is not merely about selecting a tax calculation method but understanding how each regime can impact one's financial planning and tax liability.
The old tax regime offers a range of deductions and exemptions, potentially lowering taxable income, while the new regime proposes simplified slab rates with limited deductions.
This blog elucidates the comparison of old and new tax regime calculators, highlighting their features and how they align with the respective tax regimes, thereby assisting taxpayers in determining the most beneficial option for tax filing in FY 2024-25.
The old or existing tax regime allows taxpayers to benefit from a wide range of deductions and exemptions under different sections of the Income Tax Act, such as 80C, 80D, HRA (House Rent Allowance), and more.
The old tax regime calculator is characterised by its slab rates, which tend to be higher. Still, the flexibility to claim deductions often results in lower taxable income for individuals with investments and expenses that qualify for deductions.
| Feature | Old Tax Regime Calculator | New Tax Regime Calculator |
|---|---|---|
| Input Requirements | Requires detailed inputs, including gross income, investments under 80C (ELSS, PPF, NSC, etc.), medical insurance premiums (80D), interest on home loans (24b), and other deductions. | Only requires annual income to calculate tax liability. |
| Tax Calculation | Estimates tax liability after considering all applicable deductions, showcasing how these deductions reduce taxable income. | Calculates tax liability based on revised slab rates without considering any deductions or exemptions. |
| Complexity | It is more complex due to the necessity to input various types of deductions | It is easy and more straightforward, with no need to input deductions or exemptions. |
| Opportunities to Reduce Taxable Income | It provides numerous opportunities to reduce taxable income through various deductions and exemptions. | Offers fewer opportunities to reduce taxable income, as deductions and exemptions are not considered. |
| Suitability | Suitable for individuals with significant investments and expenses that qualify for deductions, aiming to minimise tax liability. | Suitable for individuals who prefer simplicity in tax calculation or those with minimal or no investments qualifying for deductions. |
Introduced as an optional framework, the new tax regime offers reduced slab rates but requires individuals to forego most deductions and exemptions.
It is designed to simplify the tax filing process, making it appealing to those who do not make significant investments or wish to refrain from engaging in tax planning.
The new regime aims to provide relief to taxpayers by offering lower tax rates on annual income up to ₹15 lakhs.
The decision between the old and new tax regimes is not the same for all. It requires a personalised analysis based on one's income, investment, and spending patterns. Taxpayers should consider the following:
Several financial platforms and tax portals offer both new and old tax regime comparison calculators, allowing taxpayers to input their details and compare the outcomes side by side. These tools can be invaluable in making an informed decision.
Taxpayers must undertake a comprehensive evaluation of their financial circumstances, investment habits, and future goals to select the regime that optimally reduces their tax liability while supporting their financial aspirations.
PNB MetLife offers the facility to calculate tax under both regimes. Utilizing online income tax calculators to compare the difference between old and new tax regime calculators can provide a clearer perspective, enabling a choice that aligns with one’s financial strategy.
Yes, individuals with income from salary or other sources can switch between regimes each year. However, those with business income have a one-time choice to revert.
Choosing the new regime might affect your take-home salary as you will not be able to claim certain exemptions like HRA, which could have reduced your taxable income under the old regime.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
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Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
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