Old

Vs

New
Personal Tax Regime

Presentation by Mayank Mohanka, FCA

Partner, S M Mohanka & Associates
Founder Director, TaxAaram India
Coverage of the Webinar
 Proposed amendments in the New Personal Tax regime in Section 115BAC

 Deductions which can be claimed in the New Personal Tax regime

 Deductions which can be claimed only in Old Personal Tax regime

 Implications of declaring the New Personal Tax regime as the Default regime

 Comparison between Tax Slab Rates in New & Old Personal Tax Regime

 Break-even point analysis at different levels of Income to facilitate the choice

between the Old and New personal tax regime

 Empirical Findings on Old v. New Personal Tax Regime

 Old v. New Regime: Practical Tip for Home Loan Takers

 Practical Case Studies on Old v. New personal tax regime

 Impact on Taxpayers opting for Presumptive Basis of Income

 Old v. New Personal Tax Regime: Income Tax Calculator & Reference Articles

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New Personal Tax Regime: Backdrop

 With a view to simplify the complex maze of plethora of deduction claims of the
individual & HUF taxpayers, Government introduced the New Personal Tax
regime w.e.f. FY 2020-21 and onwards with reduced tax rates u/s 115BAC

 The compulsory requirement of foregoing of the majority of the available

specified deductions by the individuals and HUFs opting for the new personal
tax regime made the said new regime unpopular and with a very few takers.

 The Government wanted more and more taxpayers to switch to the new regime,
to reduce the complexities in return filing and assessments arising out of the
plethora of deduction claims of the assessees applicable in the old regime

 In order to make the new regime more appealing to the taxpayers, some
significant amendments in the new personal tax regime u/s 115BAC, have been
proposed in the Finance Bill 2023

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Budget Amendments in New Personal Tax
Regime
 New Personal Tax Regime u/s 115BAC(1A) to be the Default Regime

 Basic Exemption Limit increased from Rs 2.5 lakhs to Rs 3 lakhs in new regime

 Tax slabs in New personal tax regime revamped

 New revamped slab rates are: upto 3,00,000 – Nil Tax; 3,00,001 to 6,00,000 – 5%; 6,00,001 to
9,00,000 – 10%; 9,00,001 to 12,00,000 – 15%; 12,00,001 to 15,00,000 – 20% and above
15,00,000 – 30%.

 Threshold income limit for rebate u/s 87A increased from Rs. 5 lakhs to Rs. 7 lakhs. At the above
newly prescribed slab rates, the new rebate limit u/s 87A comes out Rs. 25,000 on the exempt
income of Rs 7 lakhs, as compared to existing rebate limit of Rs 12,500 on the exempt income of
Rs 5 lakhs.

 Standard Deduction u/s 16(ia) of Rs. 50,000, now allowable in new personal tax regime, as well

 Deduction in respect of family pension u/s 57(iia), upto Rs. 15,000, allowable in new personal
tax regime, as well

 Surcharge rate for HNIs, having annual incomes exceeding Rs. 5 crores, reduced from 37% to
25%, so their effective tax rate will reduce from 42.74% to 39%

 New Personal Tax Regime can be opted by AOP, BOI & Artificial Juridical Person, as well

 All the above amendments will become effective from FY 2023-24 (AY 2024-25) and onwards
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Deductions allowable in New Personal Tax
Regime
 Standard Deduction of Rs. 50,000 u/s 16(ia) to salaried individuals & pensioners

 Deduction in respect of family pension u/s 57(iia), upto Rs. 15,000

 Deduction in respect of contribution to Agniveer Corpus Fund under the newly inserted section
80CCH(2)

 Deduction in respect of Employer’s Contribution to National Pension Scheme (NPS) u/s 80CCD(2)
to the extent of 10% of basic salary and dearness allowance in case of private sector employee &
14% in case of government employee

 Transport allowance u/s 10(14) in case of a specially-abled person

 Conveyance allowance u/s 10(14) received to meet the conveyance expenditure incurred as part
of the employment

 Daily allowance u/s 10(14) received to meet the ordinary regular charges or expenditure you
incur on account of absence from his regular place of duty

 Exemption on Voluntary Retirement 10(10C), Gratuity u/s 10(10) and Leave encashment u/s
10(10AA)

 Interest on Home Loan on let-out property (Section 24)

 Deduction in respect of additional employee cost (Section 80JJAA)

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Deductions allowable Only in Old Personal
Tax Regime
 House Rent Allowance u/s 10(13A)

 Leave Travel Concession u/s 10(5)

 Interest on housing loan in respect of self occupied or vacant property u/s 24(b)

 Helper Allowance u/s 10(14)

 Children Education Allowance

 Chapter VIA Deductions u/s 80C like LIC, ULIPs, PPF; NPS Contribution u/s 80CCD(1)/(1B)

 Deduction in respect of Mediclaim Premium u/s 80D

 Deduction in respect of Interest paid on education loan u/s 80E

 Deduction in respect of Donation u/s 80G

 Deduction in respect of Royalty income of Authors on Books u/s 80QQB

 Deduction in respect of Interest Income on Savings Bank account u/s 80TTA

 Deduction in respect of Interest Income on deposits with Post Office, Banks u/s 80TTB

 Additional Depreciation u/s 32(1)(iia)

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New Tax Regime to be the Default Regime

 Uptill FY 2022-23 (AY 2023-24), the Old Personal Tax Regime is the Default Regime and the
Taxpayers opting for the New regime and having their income under the head ‘Profits from
Business or Profession’ are required to file an electronic declaration in prescribed Form 10IE,
before the due date of filing their ITRs

 W.e.f. FY 2023-24 (AY 2024-25), the New Personal Tax Regime u/s 115BAC(1A), will become the
Default Regime

 Persons having their income under the head ‘Profits from Business or Profession’ and wanting to
benefit from the specified deductions available only under the Old regime, are now required to
exercise their option of filing their ITRs under the Old Regime by filing an electronic declaration
in the prescribed form u/s 115BAC(6), before filing of their ITRs

 Such persons shall be able to exercise the option of opting back to the new regime u/s
115BAC(1A) only once

 Persons not having income from business or profession shall be able to exercise the option of
furnishing their ITRs as per the Old regime, in each year, by selecting the option of old regime in
their ITR Forms

 The salaried individuals will be required to submit their investment declaration forms to their
employers at the beginning of the financial year only, if they wish to opt for the old regime, in
order to enable their employers to deduct accurate TDS on their salaries, after giving the benefit
of deductions claimed

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New vs Old Regime: Comparison between
Slab Rates
 The comparison between the tax slab rates in the two personal tax regimes is tabulated
as under, for ready reference of all
Total Income (Rs) New Regime Old Regime (with
(Section 115BAC) Deductions) Tax
Rate (%)
Proposed Tax Rate
in Finance Bill 2023
(%)
Up to 2,50,000 Nil Nil
From 2,50,001 to 3,00,000 Nil 5
From 3,00,001 to 5,00,000 5 5
From 5,00,001 to 6,00,000 5 20
From 6,00,001 to 7,50,000 10 20
From 7,50,001 to 9,00,000 10 20

From 9,00,001 to 10,00,000 15 20

From 10,00,001 to 12,00,000 15 30

From 12,00,001 to 15,00,000 20 30
Above 15,00,000 30 30

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New vs Old Regime: Break Even Point Analysis

 For individuals and HUFs having taxable annual incomes of upto Rs 7 lakhs and above Rs
5 crores, respectively, the choice of going in for the new regime is very clear.

 However, for those earning annual incomes in between 7 lakhs to 5 crores, the figures of
available deductions which are required to be claimed in the old regime to break-even
with the reduced tax liability in the new regime are tabulated below:
Income Levels Deduction Amount (Including Standard
Deduction in case of Salaried Individuals)
Needed in Old Regime to Break Even with
Tax Liability in New Regime
Upto 5,00,000 Nil Tax under both regimes
6,00,000 1,00,000
7,00,000 2,00,000
8,00,000 2,12,500
9,00,000 2,62,500
10,00,000 3,00,000
11,00,000 3,25,000
12,00,000 3,50,000
13,00,000 3,62,500
14,00,000 3,75,000
15,00,000 4,08,333
Above 15,00,000 upto 5,00,00,000 4,25,000

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New vs Old Regime: Empirical Findings

 As per the numbers arrived at based on the break-even point analysis, all taxpayers having
their annual taxable incomes above Rs 15 lakhs should consider continuing with the old
personal tax regime, only, if their available deductions are greater than Rs. 4,25,000 in a
year.

 But, if such available deductions are equal to or less than Rs 4,25,000 in a year, or if they
don’t want to block their disposable funds in making such investments of Rs 4,25,000,
then they should definitely switch to the new regime to reduce their income tax liability.

 Those taxpayers earning an annual income of Rs 10,00,000 should consider continuing

with the old regime only, if their available deductions exceed Rs 3,00,000 in a year,
otherwise they should switch to the new regime.

 Those taxpayers earning an annual income of Rs 12,00,000 should consider continuing

with the old regime only, if their available deductions exceed Rs 3,50,000 in a year,
otherwise they should switch to the new regime.

 Also, for individuals earning annual income of Rs 12,50,000 the break-even figure of
available deductions comes out at Rs. 3,62,500 and for annual income of Rs 15,00,000
this figure of available deduction works out at Rs. 4,08,333

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New vs Old Regime: Tip for Home Loan Takers

 One more important observation. In the Budget, the double deduction in

respect of home loan principal repayments and interest first u/s 80C/24(b) and
subsequently again as cost of acquisition u/s 48, while computing capital gains
on sale of such house property, has been plugged and prohibited.

 So, as a natural corollary, if one’s home loans’ principal and interest EMIs
constitute a sizeable chunk of available deductions, and if one intends to sell-off
the house in future, then one may also consider forgoing the deduction in respect
of home loan principal repayments u/s 80C and interest u/s 24(b) presently, and
conveniently opt for the new regime

 This will help one claim the same as cost of acquisition or cost of improvement
in respect of such house property in computing the capital gains, at the time of its
sale. Even the benefit of indexation may also be availed on such amounts then.

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New vs Old Regime: Practical Case Study 1
Comparison between Old Regime & New Regime at Income Level of Rs 10 lakhs
Old Regime New Regime
Gross Salary 1000000 1000000
Less: Deductions Claimed
Standard Deduction u/s 16(ia) 50000 50000
Deductions u/s 80C
Employees Contribution to PF 50000
Principal Repayment (Home Loan) 50000
ELSS 50000 150000 Not Available
Interest on Home Loan u/s 24(b) 80000 Not Available
Helper Allowance u/s 10(14) 20000 Not Available
Scenario 1
Total Available Deductions 300000 50000
Gross Total Income 700000 950000
Total Tax Liability 54600 54600
Scenario 2
If ELSS Investment is not done
Total Available Deductions 250000 50000
Total Tax Liability 65000 54600
Scenario 3
If Mediclaim Premium u/s 80D of Rs 25000 has
also been paid
Total Available Deductions 325000 50000
Total Tax Liability 49400 54600
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New vs Old Regime: Practical Case Study 2
Comparison between Old Regime & New Regime at Income Level of Rs 15 lakhs
Old Regime New Regime
Gross Salary 1500000 1500000
Less: Deductions Claimed
Standard Deduction u/s 16(ia) 50000 50000
Deductions u/s 80C
Employees Contribution to PF 90000
LIC Premium 10000
Sukanya Samridhi Yojna 50000 150000 Not Available
House Rent Allowance (HRA) u/s 10(13A) 100000 Not Available
Leave Travel Concession (LTC) u/s 10(5) 108333 Not Available
Scenario 1
Total Available Deductions 408333 50000
Gross Total Income 1091667 1450000
Total Tax Liability 145600 145600
Scenario 2
If Sukanya Samridhi Yojna Deposit is not made
Total Available Deductions 358333 50000
Total Tax Liability 161200 145600
Scenario 3
If Mediclaim Premium u/s 80D of Rs 25000 has
also been paid
Total Available Deductions 433333 50000
Total Tax Liability 137800 145600
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New vs Old Regime: Practical Case Study 3
Comparison between Old Regime & New Regime at Income Level of Rs 20 lakhs
Old Regime New Regime
Gross Salary 2000000 2000000
Less: Deductions Claimed
Standard Deduction u/s 16(ia) 50000 50000
Deductions u/s 80C
Principal Repayment of Home Loan 120000
NPS Contribution u/s 80CCD(1B) 50000 150000 Not Available
Interest on Home Loan (Self-occupied
property) 150000 Not Available
Leave Travel Concession (LTC) u/s 10(5) 50000 Not Available
Research Allowance u/s 10(14) 25000 Not Available
Scenario 1
Total Available Deductions 425000 50000
Gross Total Income 1575000 1950000
Total Tax Liability 296400 296400
Scenario 2
If NPS Contribution is not done
Total Available Deductions 395000 50000
Total Tax Liability 305760 296400
Scenario 3
If Mediclaim Premium u/s 80D of Rs 25000 has
also been paid
Total Available Deductions 450000 50000
Total Tax Liability 288600 296400
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New vs Old Regime: Practical Case Study 4
Comparison between Old Regime & New Regime in case of a Professional
Old Regime New Regime
Professional Receipts 2500000 2500000
Less: Professional Expenses 1500000 1500000
Net Income in Profession 1000000 1000000
Royalty Income on Professional Book 400000 400000
Total Income 1400000 1400000
Less: Deduction u/s 80QQB in respect of
Royalty 300000 Not Available
Less: Deduction u/s 80C on LIC Premium 41670 Not Available

Scenario 1
Total Available Deductions 341670 0
Gross Total Income 1058330 1400000
Total Tax Liability 135200 135200
Scenario 2
If LIC Premium is not paid
Total Available Deductions 300000 0
Total Tax Liability 148200 135200
Scenario 3
If Mediclaim Premium u/s 80D of Rs 24330 has
also been paid
Total Available Deductions 366000 0
Total Tax Liability 127610 135200

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Presumptive Taxation u/s 44AD/44ADA: New vs
Old Regime
 The threshold limit for presumptive taxation scheme in respect of small business u/s 44AD
has been increased from Rs 2 crores to Rs 3 crores, and in respect of professionals u/s
44ADA has been increased from Rs 50 lakhs to Rs 75 lakhs, w.e.f. FY 2023-24 and onwards

 These increased limits are subject to the mandatory condition that respective cash
receipts from such small businesses or professions, must not exceed 5% of their total
receipts from such business or profession.

 In the presumptive taxation scheme u/s 44AD, the proprietor businessman declares the
income at 6%/8% of the total turnover, on presumptive basis, without claiming any
business expenditure

 In the presumptive taxation scheme u/s 44ADA, the proprietor professional declares the
income at 50% of the total turnover, on presumptive basis, without claiming any business
expenditure

 Chapter VIA deductions are available in presumptive income schemes u/s 44AD/44ADA. In
terms of tax slab rates, the new regime u/s 115BAC(1A) is naturally the clear choice.
However, if the taxpayers opting for presumptive income scheme, also have Chapter VIA
deductions like 80C/80D/Interest on Home Loan for self occupied property etc. then the
break-even point analysis done by us in previous slide, will help in the choice between the
Old and New regime

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New vs Old Regime: Practical Case Study 5
Comparison between Old Regime & New Regime in case of a Professional opting Presumptive Income
Old Regime New Regime
Professional Receipts 2800000 2800000
Professional Expenses 1000000 1000000
Deemed Income in Profession (50% of Total
Professional Receipts) u/s 44ADA 1400000 1400000

Less: Interest paid on Home Loan u/s 24(b) 200000 Not Available
Less: Deduction u/s 80C
(i) LIC Premium 41670 Not Available
(ii) ELSS 100000 Not Available
Scenario 1
Total Available Deductions 341670 0
Gross Total Income 1058330 1400000
Total Tax Liability 135200 135200
Scenario 2
If ELSS Investment is not done
Total Available Deductions 241670 0
Total Tax Liability 166399 135200
Scenario 3
If Mediclaim Premium u/s 80D of Rs 24330 has
also been paid
Total Available Deductions 366000 0
Total Tax Liability 127610 135200

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New vs Old Regime: Income Tax Calculator

 The Income Tax Department has launched a Tax Calculator for the Taxpayers in
order to assist them in choosing wisely between the Old and the New Personal Tax
Regime.
 The link for the said Tax Calculator is:
https://incometaxindia.gov.in/Pages/tools/115bac-tax-calculator-finance-bill-
2023.aspx

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Old vs. New Personal Tax Regime: Reference
Articles
 The Participants may also refer detailed Articles on this practically relevant topic
of ‘Old vs. New Personal Tax Regime, authored by the author of this PPT and
published in Taxmann.com at the below links:

 The Tale of Dhani Ram, Mani Ram, Buni Ram, Gyani Ram & the Personal Tax
related Budget Amendments https://www.taxmann.com/budget/budget-
story/488/the-tale-of-dhani-ram-mani-ram-buni-ram-gyani-ram--the-personal-
tax-related-budget-amendments

 Which Personal Tax Regime is More Beneficial? An In-depth Break-Even Point

Analysis https://www.taxmann.com/budget/budget-story/457/which-personal-
tax-regime-is-more-beneficial-now-an-in-depth-break-even-point-analysis

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 TOGETHER
WE GROW FURTHER
Presentation by Mayank Mohanka, FCA
Partner, S M Mohanka & Associates
Founder, TaxAaram India

For More Information, Visit: https://taxmann.com/