{"id":10247,"date":"2020-06-19T11:28:23","date_gmt":"2020-06-19T11:28:23","guid":{"rendered":"\/blog\/?p=10247"},"modified":"2025-04-11T06:58:38","modified_gmt":"2025-04-11T06:58:38","slug":"new-vs-old-which-income-tax-regime-should-you-opt-for-in-the-coming-year","status":"publish","type":"post","link":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/tax-saving-investments\/new-vs-old-which-income-tax-regime-should-you-opt-for-in-the-coming-year\/","title":{"rendered":"New vs Old: Which Income Tax Regime Should you opt for in the Coming Year?"},"content":{"rendered":"\n

Budget 2020 saw Finance Minister Nirmala\nSitharaman introducing a new\nincome tax regime. On the one hand, this new system comes with lower\nslab rates, and on the other, it eliminates certain deductions and claims. The\nother thing about this new tax regime is that it\u2019s optional. This means that\nyou do not need to compulsorily opt for this system of taxation. You can choose\nto continue with the old scheme, wherein you can claim all the available\ndeductions and exemptions associated with tax-saving investments.<\/p>\n\n\n\n

So, if you\u2019re wondering which system of\ntaxation to opt for, you\u2019re not alone. With the tax filing season drawing in\ncloser, many salaried employees and self-employed professionals are faced with\nthe same doubts. To sort this out further, let\u2019s take a look at these two\nsystems of taxation.<\/p>\n\n\n\n

Old vs. new income tax regime<\/strong><\/h2>\n\n\n\n

The old tax regime has different slabs of\nincome. It also has different exemption limits for people between 60 and 80\nyears of age, and for people above 80. Additionally, the old system lets you\nclaim deductions on the tax-saving\ninvestments you have. Here\u2019s a look at the tax rates as per the old tax\nregime.<\/p>\n\n\n\n

\n Old income slabs<\/strong>\n <\/td>\n Tax rates for people below 60\n years<\/strong>\n <\/td>\n Tax rates for people between\n 60 and 80 years<\/strong>\n <\/td>\n Tax rates for people above 80\n years<\/strong>\n <\/td><\/tr>
\n Up to Rs. 2,50,000\n <\/td>\n Nil\n <\/td>\n Nil\n <\/td>\n Nil\n <\/td><\/tr>
\n Rs. 2,50,001 to Rs. 3,00,000\n <\/td>\n 5%\n <\/td>\n Nil\n <\/td>\n Nil\n <\/td><\/tr>
\n Rs. 3,00,001 to Rs. 5,00,000\n <\/td>\n 5%\n <\/td>\n 5%\n <\/td>\n Nil\n <\/td><\/tr>
\n Rs. 5,00,001 to Rs. 10,00,000\n <\/td>\n 20%\n <\/td>\n 20%\n <\/td>\n 20%\n <\/td><\/tr>
\n Above Rs. 10,00,000\n <\/td>\n 30%\n <\/td>\n 30%\n <\/td>\n 30%\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

By contrast, as per the new tax regime, the new tax rates across\nuniformly across all ages. The income slabs are smaller and are divided more\nrobustly, and there are 7 different income slabs in the new income tax regime. Let\u2019s take a look at\nthe new tax rates.<\/p>\n\n\n\n

\n New income slabs<\/strong>\n <\/td>\n Tax rates applicable<\/strong>\n <\/td><\/tr>
\n Up to Rs. 2,50,000\n <\/td>\n Nil\n <\/td><\/tr>
\n Rs. 2,50,001 to Rs. 5,00,000\n <\/td>\n 5%\n <\/td><\/tr>
\n Rs. 5,00,000 to Rs. 7,50,000\n <\/td>\n 10%\n <\/td><\/tr>
\n Rs. 7,50,001 to Rs. 10,00,000\n <\/td>\n 15%\n <\/td><\/tr>
\n Rs. 10,00,001 to Rs. 12,50,000\n <\/td>\n 20%\n <\/td><\/tr>
\n Rs. 12,50,001 to Rs. 15,00,000\n <\/td>\n 25%\n <\/td><\/tr>
\n Above Rs. 15,00,000\n <\/td>\n 30%\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

So, as you can see, the new income tax regime\ngradually increases the rate of tax from one income slab to another.<\/p>\n\n\n\n

Additional\nRead:<\/strong> Has the Budget Simplified the\nIncome Tax Regime or Complicated it?<\/a><\/p>\n\n\n\n

Should you opt for the old income tax regime? <\/strong><\/h3>\n\n\n\n

The old tax system has been in place for\nsome time now, and you\u2019re probably more familiar with it. However, the answer\nto whether or not you should choose this system depends primarily on the slab\nin which your income falls, and on the tax-saving investments you have in your\nportfolio.<\/p>\n\n\n\n

Since this regime makes room for deductions\nrelating to tax-saving\ninvestments, it\u2019s advisable to opt for this alternative if your\nportfolio includes many such investments. This way, you can claim the entire\nRs. 1.5 lakhs allowed under section 80C and reduce your income tax rates\nsignificantly. <\/p>\n\n\n\n

Under the old tax regime, you can also enjoy\ndeductions for NPS investments over and above what section 80C offers. You can\nclaim an additional Rs. 50,000 for NPS investments under section 80CCD(1B). The\nold system also gives you other benefits like HRA exemption and deductions for\nhome loan interest up to Rs 2 lakhs. <\/p>\n\n\n\n

If the amount of tax-saving investments in your portfolio\nare just slightly short of the maximum deduction allowed, you could invest your\nsavings in tax-saving options. The Moneyfy app from Tata Capital can help you\nhere. By simply downloading our app from the app store and launching it, you\ncan invest in tax-saving mutual funds like ELSS with just a few simple clicks.\nYou can also start and SIP or invest a lump sum amount on Moneyfy.<\/p>\n\n\n\n

Additional Read: <\/strong>Is ELSS a Wealth Creation & Tax-Saving Tool?<\/a><\/p>\n\n\n\n

Should you opt for the new income tax regime?<\/strong><\/h3>\n\n\n\n

The new tax rates may be arguably lower in\nsome cases. So, depending on your income level, you could actually be charged a\nlower rate as per the new scheme. For instance, say your total taxable income\nis Rs. 7,50,000. As per the old system, your tax rate is 20%. As per the new tax rates, however,\nit\u2019s only 10%. This tells you that you should opt for the new income tax regime if\nthe rates therein come out to be lower, so your tax burden is minimized.<\/p>\n\n\n\n

Also, since the new regime does not allow\nfor any deductions, people with fewer tax-saving investments may benefit more\nfrom the new tax rates.<\/p>\n\n\n\n

What\nare some things to keep in mind before choosing any one regime?<\/strong><\/p>\n\n\n\n

Before choosing between the old and new\nsystem, it helps to follow some tips and keep some things in mind. Here are\nsome such pointers to help you make the choice.<\/p>\n\n\n\n