With the help of this blog you will learn what exactly the new tax regime is, the comparison of old vs new tax regime among different factors like tax slabs, deductions and rebate available, practical examples of how the new regime will make a difference for each tax slab, and whether we can switch between old and new tax regimes.

What is New Tax Regime??

The New Regime was first launched in the Budget 2020. Since then, changes has been made to make it more attractive.

The government brought the New Regime to simplify taxes. For many, it becomes difficult to claim deductions and exemptions and maintain records. The government wants to ease all this compliance burden.

So Basically if you want your tax planning to be straightforward, New Regime will be the right choice.

But if you are among those who are fine with the compliances so that you can save maximum tax, you will need to thoroughly compare the two and then decide. So we are giving you the detailed comparison that can help you take a call on whether you should opt for the New Tax Regime or the Old one for in 2023

Detailed Comparison among New and Old Regime

Tax Slabs

In the new regime, the finance minister has increased the number of slab rates to six. Consequently, the tax rates are now 0%, 5%, 10%, 15%, 20%, and 30% in the six slabs while it is 0%,5%,20% and 30% under older regime.

Here is a comparison between the old and new tax slabs

Tax Slabs Under New And Old Regime
Old Tax Regime		New Tax Regime
Tax Slab (₹)	Old Tax Rates	Tax Slab (₹)	New Tax Rates
0 – 2.5 lakh	0%	0-3 lakh	0%
2.5 lakh – 5 lakh	5%	3 lakh – 6 lakh	5%
5 lakh – 10 lakh	20%	6 lakh-9 lakh	10%
10 lakh & above	30%	9 lakh-12 lakh	15%
–	–	12 lakh-15 lakh	20%
–	–	15 lakh & above	30%

Deductions available under both regime

The exemptions and deductions approx. more than 70 benefits including popular exemptions like HRA, LTA, 80C, 80D are available in the older regime but there are few available under the New Tax Regime like  standard deduction of Rs 50,000. Here is the comparison of commonly used deductions in both regime..

Commonly Used Deductions Comparison under both regime
Deductions	Old Tax Regime	New Tax Regime
Standard Deduction of 50,000 for employees	Allowed	Allowed
Deduction u/s 80 C { LIC, EPF, FD, Children Tuition Fees etc} upto 1,50,000	Allowed	Not Allowed
Medical Insurance Premium-80 D	Allowed	Not Allowed
Donation to Political Party/Trust-80 G	Allowed	Not Allowed
Saving Banking Interest -80TTA & 80TTB	Allowed	Not Allowed
Employees Contribution to NPS	Allowed	Not Allowed
Employer Contribution to NPS	Allowed	Allowed
House Rent Allowance	Allowed	Not Allowed
Leave Travel Allowance	Allowed	Not Allowed
Interest on Home Loan u/s 24 b on self occupied vacant property	Allowed	Not Allowed
Interest on Home Loan u/s 24 b on let out property	Allowed	Allowed
Interest on Educational Loan-80E	Allowed	Not Allowed
Interest on Electric Vehicle Loan-80 EEB	Allowed	Not Allowed
Exemption on Gratuity u/s 10(10)	Allowed	Allowed
Exemption on Leave Encashment  u/s 10(10AA)	Allowed	Allowed
Professional Tax	Allowed	Not Allowed

Rebate

If the taxable income (after all deductions) under the old regime is below Rs 5 lakh, then the individual doesn’t need to pay any tax. Under the New Regime, the entire income will be tax-free if the taxable income is under Rs 7 lakh.

Rebate under both regime
Rebate	Old Tax Regime	New Tax Regime
Rebate Amount	12500	25000

Old Vs. New Tax Regime: Which One Should You Pick?

This decision to switch in between new or old tax regime depends on several factors like:-

Investment Goals- The new tax regime suits you if you are flexible with your investments and not looking forward to invest in tax-saving instruments. However, If you have investment goals such as saving for your retirement or building a capital for a long-term goal, the old tax regime may be more beneficial as it offers deductions for contributions to various investment instruments.

Simplicity- The new tax regime documentation process is simple, it eliminates the need to calculate and claim deductions and exemptions, which helps taxpayers to file the ITR quickly.

Income level- Under the new tax regime, the tax rates are lower than the old tax regime. The new tax regime may be more beneficial if you have a higher income. As per budget 2023, an individual with INR 9 lakh annual income will have to pay INR 45,000 as tax, which is 5% of the taxable income. This represents a reduction of INR 47,500 from the INR 92,500 tax liability that the same individual would have had under the old tax regime.

Similarly, an individual with INR 15 lakh annual income will have to pay a tax of INR 1.5 lakh under the new tax rates introduced under budget 2023 for the new tax regime, which is a reduction from the earlier tax liability of INR 1.87 lakh calculated as per new tax regime rates before budget 2023. The reduction in tax liability is due to the lower tax rates under the new tax regime, which has revised tax slabs and rates to relieve taxpayers.

Deductions and exemptions- Under the old tax regime, you can avail of a deduction of Rs 1.5 lakh under Section 80C and Rs 2 lakh under Section 24(b) on the interest amount for self-occupied property. This means a straight deduction of Rs. 3.5 lakh can be availed under the old tax regime, while the new tax regime does not offer such deductions and exemptions.

Unfortunately, there is no straight forward answer. The culprit is the complexity of the Indian tax regulations.

Let’s take three examples or scenarios to see how deductions and exemptions, or lack thereof, will impact taxes under the New Tax Regime and the Old one.

Scenario 1: When You Don’t Claim Any Deduction Or Exemption

In this scenario, we compare the two regimes assuming that the individual does not claim any deduction in both.

Assume Akshay is an employee who works as an doctor and has an income of Rs 9 lakh. Unfortunately, due to his education expenditure and family obligations, he is unable to avail deductions available under the old tax regime. So under the old tax regime, his tax liability comes out to be Rs 85,800.

This is how the calculations work for Sumit.

Taxable income: Rs 9,00,000 – Rs 50,000 (Standard Deduction) = Rs 8,50,000

Income Tax Calculation Under Old Tax Regime
Tax Slabs Under Old Tax Regime	Tax Rate	Amount (₹)
Taxable Income		Rs. 8,50,000
0 – 2,50,000	0%	NA
2,50,000 – 5,00,000	5%	12,500 (5% *2,50,000)
5,00,000 – 10,00,000	20%	70,000 (20% * 3,50,000)
10,00,000 & above	30%	NA
Total Tax		82,500
Cess @ 4%		3,300
Total Tax Inclusive Of Cess		85,800

So, the tax outgo on Rs 8,50,000 will be Rs 85,800. If Akshay chooses the new tax regime, his total tax outgo will be Rs 44,200

To help you avoid the above calculations, we have provided the tax liability under both regimes at different income levels in the table below. When you don’t avail deductions, the New Tax Regime works out to be better.

Tax Paid Under Old And New Tax Regime for FY 2023-24 (in ₹)
Income	Old Regime	New Regime	Savings Under New Regime
6,00,000	23,400	0	23,400
7,00,000	44,200	0	44,200
8,00,000	65,000	31,200	33,800
9,00,000	85,800	41,600	44,200
10,00,000	1,06,600	54,600	52,000
11,00,000	1,32,600	70,200	62,400
12,00,000	1,63,800	85,800	78,000
13,00,000	1,95,000	1,04,000	91,000
14,00,000	2,26,200	1,24,800	1,01,400
15,00,000	2,57,400	1,45,600	1,11,800
16,00,000	2,88,600	171600	117000

Scenario 2: When Deduction Under Section 80C & 80D is Claimed

In this scenario, we consider that the taxpayer takes Rs 1,50,000 and Rs 50,000 benefits under sections 80C and 80D, respectively. So, if you include the standard deduction of Rs 50,000, the taxpayer gets a total deduction of Rs 2.5 lakh.

If your income is below Rs 9 lakh, then the old tax regime is beneficial as you are saving smore tax. As your income increases, you save more tax with the new regime.

Tax Paid Under Old And New Tax Regime for FY 2023-24 (in ₹)
Income	Old Regime	New Regime	Savings Under New Regime
6,00,000	0	0	0
7,00,000	0	0	0
8,00,000	23,400	31,200	-7,800
9,00,000	44,200	41,600	2,600
10,00,000	65,000	54,600	10,400
11,00,000	85,800	70,200	15,600
12,00,000	1,06,600	85,800	20,800
13,00,000	1,32,600	1,04,000	28,600
14,00,000	1,63,800	1,24,800	39,000
15,00,000	1,95,000	1,45,600	49,400
16,00,000	2,26,200	171600	54600

Scenario 3: When Taxpayer Claims Deduction Under Section 80C, For NPS Investments, Interest On Home Loan And Health Insurance Premium

In this scenario, we have considered employees who claim deductions not only from their investments under section 80C and 80CCD (1B) worth Rs 2 lakh but also claim a deduction for interest paid on home loans (Rs 2 lakh) and health Insurance premiums (Rs 25,000).

Someone who can claim all the above deductions is better off with the old tax regime.

Tax Paid Under Old And New Tax Regime for FY 2023-24 (in ₹)
Income	Old Regime	New Regime	Savings Under New Regime
6,00,000	0	0	0
7,00,000	0	0	0
8,00,000	0	31,200	-31,200
9,00,000	0	41,600	-41,600
10,00,000	18,200	54,600	-36,400
11,00,000	39,000	70,200	-31,200
12,00,000	59,800	85,800	-26,000
13,00,000	80,600	1,04,000	-23,400
14,00,000	1,01,400	1,24,800	-23,400
15,00,000	1,24,800	1,45,600	-20,800
16,00,000	1,56,000	171600	-15600

Can we switch between Old and New Tax Regime?

In Union Budget 2023, the new tax regime was made the default regime. This implies that if you don’t explicitly choose between the old and new tax regimes, your taxes will automatically be calculated under the new regime. However, you retain the flexibility to switch back to the old regime at any point before the due date for filing your tax return for the relevant assessment year. The frequency of switches permitted depends on your profession or specific criteria set forth by tax regulations.

Nature of Income	Time of selection of option of old vs new regime
Income from Salary or any other head of income attracting TDS	A salaried individual can switch between the new and the old tax regime in every financial year. Even if you have opted for the new tax regime for TDS throughout the year, you still have the option to easily change your chosen tax regime while filing your ITR.
Income from Business and Profession	Any individual with an income from a business or profession is not eligible to switch regimes more than once. For instance, once you choose the new tax regime, you can only switch back to the old regime once in your lifetime. This switch requires filing Form 10-IE along with your ITR. If you haven’t already filed Form 10-IE by the original due date for filing your ITR, you cannot switch back to the old regime for that year.