Should we shift to the New tax regime or stay in the Old tax regime?

A burning question that every individual taxpayer is confused about:

As we move into the new year, this thread on new v/s old regime will help you make better tax planning decisions by March 31, 2024🧵👇

[1] Brief background

An individual can opt to be taxed at beneficial rates under Section 115BAC, as per the slabs mentioned below!

For FY24 onwards, the new tax regime shall be the default regime for all individuals and HUFs, unless opted otherwise.

[2] Standard Deduction for salaried individuals

A standard deduction of ₹50,000 is available to individuals under both the new and old regime.

Unlike the new regime, which was applicable up to March 31, 2023.

[3] Opting for the new tax regime!

A number of exemptions/deductions are not available when the new tax regime is opted for. Here are some of them:

1. Section 80C

2. Section 80D

3. HRA/LTA

4. Interest on loan for self-occupied property

5. Any additional depreciation in business

[4] Option to change regimes each year?

All individuals/HUFs have an option to switch between the new and old tax regimes every year

However, once those with business income who opt out of the new tax regime once,

they can't opt-in again for the new tax regime in the future/

[5] Rebate u/s 87A

Under the old tax regime a rebate of ₹12.5K is available where income (after deductions) does not exceed ₹5 Lakhs.

Under the new regime, rebate u/s 87A has been increased to ₹25K where income does not exceed ₹ 7 Lakhs.

6] New Regime - a game changer for HNIs?

For HNIs who are earning more than ₹5 crore, the new tax regime is hands down more beneficial. Why?

The surcharge is now capped to 25% instead of 37% in the old tax regime.

This reduces the ETR to 39% instead of 42.74% for HNIs.

[7] So, which is better?

Both the regimes have their share of benefits depending on income levels, spending habits and availability of deductions.

Therefore, new vs. old tax regime is a fact specific exercise.

Use calculator:

https://eportal.incometax.gov.in/iec/foservices/#/TaxCalc/calculator

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