Old Vs New Income tax regime 2024-25: Which one is better for you

As of the financial year 2024-25, the Indian tax system offers taxpayers the choice between two tax regimes: the old regime and the new regime. Each offers distinct advantages and disadvantages, and the right choice can vary depending on your financial profile.

In this guide, we delve into the key differences between the old vs new tax regimes, so that you can select one that best suits your needs.

What is a tax regime?

A tax regime refers to a system of taxation that outlines the tax rates, exemptions, deductions, and overall tax structure applicable to an individual or entity. As mentioned earlier, the Indian government currently offers two different income tax regimes to choose from: the old regime and the new regime.

What was the old 2023-24 tax slab?

Under the old tax regime for the financial year 2023-24, taxpayers benefited from various deductions and exemptions, including those under Sections 80C, 80D, and others. The old tax slabs were as follows:

These slabs allowed individuals to reduce their taxable income by availing deductions on various investments and expenses, which made it a popular choice for many.

What is the new 2024-25 tax slab?

The new tax regime introduced for the financial year 2024-25 offers lower tax rates but eliminates most deductions and exemptions available under the old regime. The new tax slabs are:
 

What tax implication difference exists between the old and new tax regimes?

The primary difference between the old and new tax regimes lies in the availability of deductions and exemptions. Under the old regime, taxpayers could reduce their taxable income significantly by claiming various deductions, such as those under Sections 80C, 80D, HRA (House Rent Allowance) and others. The new regime, on the other hand, offers lower tax rates but disallows deductions.

Old vs New Tax regime: How to choose the right one for you

Choosing between the old and new tax regimes depends on your financial profile, investment habits, and income level. Here are some factors to consider:

• Income Level: If your income is higher and you can claim substantial deductions, the old regime might be more beneficial.
• Investment Habits: If you regularly invest in tax-saving instruments like ELSS, PPF, or insurance, the old regime allows you to maximize tax savings through deductions.
• Simplicity: The new regime could be more appealing if you prefer a simplified tax process without the need to track multiple deductions.

Conclusion

Between the old vs new tax regime, selecting the right one for you requires careful consideration of your income structure, deductions claimed, and investment preferences. We suggest you utilise online tax calculators or consult a tax advisor to assess which regime offers you the greater tax benefit. Whether you go with the old or new tax regime, maximise your savings plan with the Kotak811 Zero Balance Savings Account. So, make the most of it and manage your earnings seamlessly.

FAQs 

Can I choose between tax regimes?

Yes, taxpayers can choose between the old and new tax regimes annually when filing their income tax returns.

Which tax regime is better for 10 Lakhs?

While the right answer can only be suggested after a detailed analysis of the taxpayer’s profile, in general, for a ?10 lakh income, the new regime seems better to choose as it offers lower rates. Remember that the old regime could still be better for ?10 lakh income if you claim significant deductions.

Is 80C allowed in the new tax regime?

No, the new tax regime does not have deductions under Section 80C.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.