Last Updated:November 23, 2024, 17:53 IST

For a Rs 10 lakh income, the new tax regime saves Rs 25,900 in taxes. However, the old regime benefits more if deductions are maximised

Taxpayers should make the right choice based on their income, expenses and investment plans. (Representative/Shutterstock)

In the budget for the financial year 2024-25, the central government introduced changes to the new tax regime, including an increase in the standard deduction by Rs 25,000 to Rs 75,000 and revisions to the tax slabs. However, the old tax regime remains unchanged, allowing taxpayers to continue benefiting from various deductions and exemptions.

For individuals earning an annual income of Rs 10 lakh, determining the more advantageous regime requires careful consideration.

Under the old tax regime, taxpayers can avail themselves of various sections, such as 80C (up to Rs 1.5 lakh), 80D (health insurance premium) and the standard deduction (Rs 50,000).

Old tax regime

• Total deduction: Rs 2,25,000
• Taxable income: Rs 10,00,000 – Rs 2,25,000 = Rs 7,75,000

Tax calculation:

• Up to Rs 2.5 lakh: Nil
• Rs 2.5 lakh to Rs 5 lakh: 5% = Rs 12,500
• Rs 5 lakh to Rs 7.75 lakh: 20% = Rs 55,000

Total tax: Rs 67,500

Cess (4%): Rs 2,600

Total tax payable: Rs 70,100

New tax regime

The new tax regime has lower tax slabs, but there are no deductions and exemptions.

Taxable Income: Rs 10,00,000 – Rs 75,000 = Rs 9,25,000

Tax Calculation:

• Up to Rs 3 lakh: Nil
• Rs 3 lakh to Rs 7 lakh: 5% = Rs 20,000
• Rs 7 lakh to Rs 9.25 lakh: 10% = Rs 22,500

Total Tax: Rs 42,500

Cess (4%): Rs 1,700

Total Tax Payable: Rs 44,200

Comparison and Conclusion

Old Regime Tax: Rs 70,100

New Regime Tax: Rs 44,200

If your annual income is Rs 10 lakh, the new tax regime reduces the tax liability by Rs 25,900. However, if you are able to take maximum advantage of the deductions available in the old regime, then it can be beneficial for you. Taxpayers should make the right choice based on their income, expenses and investment plans. The new system is simpler, but the old system offers the benefit of more exemptions.