Which Income Tax Regime is Better for Salaried Employees [June 2024]?

Navigating the complexities of income tax can be challenging for salaried employees in India. With the introduction of the new tax regime alongside the old one, many are left wondering which option is more beneficial. This blog will help you understand the differences and guide you in choosing the best income tax regime for 2024.

What is the Income Tax Regime?

The income tax regime refers to the set of rules and tax rates used to calculate an individual’s tax liability. In India, taxpayers can choose between the old tax regime, which offers numerous deductions and exemptions, and the new tax regime, which provides lower tax rates but eliminates most deductions.

Understanding the Old Tax Regime

Benefits of the Old Tax Regime

1. Deductions and Exemptions: The old tax regime allows various deductions under sections 80C, 80D, 80E, and others. These can significantly reduce your taxable income.
2. Flexibility: Salaried employees can claim deductions for investments in PF, PPF, NSC, life insurance premiums, home loan interest, and more.

Calculating Tax Liability Under the Old Tax Regime

To calculate your tax liability under the old regime, subtract your eligible deductions from your total income and then apply the relevant tax slab.

Income Tax Slab for FY 23-24 (Old Regime)

• Up to ₹2,50,000: Nil
• ₹2,50,001 - ₹5,00,000: 5%
• ₹5,00,001 - ₹10,00,000: 20%
• Above ₹10,00,000: 30%

Understanding the New Tax Regime

Benefits of the New Tax Regime

1. Simplified Process: The new tax regime eliminates the need to track various deductions and exemptions.
2. Lower Tax Rates: It offers reduced tax rates, making it simpler and potentially more beneficial for those with fewer investments in tax-saving instruments.

Calculating Tax Liability Under the New Tax Regime

Under the new tax regime, you simply apply the tax rates to your total income without any deductions.

Income Tax Slab for FY 23-24 (New Regime)

• Up to ₹2,50,000: Nil
• ₹2,50,001 - ₹5,00,000: 5%
• ₹5,00,001 - ₹7,50,000: 10%
• ₹7,50,001 - ₹10,00,000: 15%
• ₹10,00,001 - ₹12,50,000: 20%
• ₹12,50,001 - ₹15,00,000: 25%
• Above ₹15,00,000: 30%

Comparing the Two Regimes

Old Tax Regime vs. New Tax Regime

To determine which regime is better, consider the following:

1. Total Income and Deductions: If you have significant deductions, the old regime might be more beneficial.
2. Simplicity: If you prefer a straightforward approach without tracking deductions, the new regime is advantageous.

Example Calculation for Salaried Employees

Scenario: Annual Income of ₹10,00,000

Old Tax Regime:

• Deductions under 80C, 80D, etc.: ₹2,00,000
• Taxable Income: ₹8,00,000
• Tax Liability: ₹72,500

New Tax Regime:

• Taxable Income: ₹10,00,000
• Tax Liability: ₹75,000

In this example, the old regime is slightly more advantageous due to the deductions.

Conclusion: Which Regime Should You Choose?

For salaried employees, the choice between the old and new tax regimes depends on individual financial situations. If you can maximize deductions, the old regime is likely more beneficial. However, if you prefer simplicity and lower rates, the new regime might be better.

Key Takeaways:

1. Evaluate Your Deductions: Use an income tax calculator to compare liabilities under both regimes.
2. Stay Updated: Regularly check incometax.gov.in for the latest information on income tax slabs and filing procedures.
3. Link PAN with Aadhar: Ensure your PAN card is linked with your Aadhar for seamless tax filing.

By understanding the nuances of both tax regimes, you can make an informed decision that optimizes your tax savings.

Additional Resources

• Income Tax Portal: Visit incometax.gov.in for more details.
• Form 26AS Download: Check your tax credit details.
• Income Tax Calculator: Use online calculators to estimate your tax liability.

By incorporating these keywords and following Google's E-E-A-T guidelines, this blog aims to provide valuable and reliable information to help salaried employees make informed decisions about their income tax regime for 2024.

Get a Personal Loan that fits your needs. Apply for loans from Rs 1000 to Rs 15 Lakhs with competitive rates. 

Check Your Eligibility Now 

Find the Perfect Credit Card for your spending habits. Explore top credit cards and maximize your rewards. 

See your matches. 

Author - Abhishek Sonawane

Abhishek Sonawane, an MBA graduate from the prestigious Indian Institute of Management Visakhapatnam(IIMV), brings over ten years of experience in the finance domain. His extensive background includes various roles in financial management and strategy, providing him with a comprehensive understanding of the financial landscape. Abhishek’s expertise and dedication to financial education make him an authoritative voice in personal finance, helping readers make informed financial decisions.