THE NEW INCOME TAX

REGIME & YOU

A Quick Guide

Budget 2023 made the new income tax

regime attractive. The finance minister
recast tax slabs, raised the basic
exemption limit to Rs 3 lakh, provided
a rebate on income earned up to
Rs 7 lakh and reduced peak surcharge
rates. The old tax regime continues
but the new tax regime has become
the default regime.

Below is a special Moneycontrol guide

to help you decode the new regime
and make an informed choice.

WHO SHOULD SWITCH?

your income
Depends on and
n d th e deductions
le ve ls a , the new
n s y o u se e k . For example come
exemptio h taxable in
e b e n e fits those wit
re g im crore because
above Rs 5.5
rge rates
peak surcha t.
have been cu

Stick to the old Another example.

tax regime if you If your income is
Rs 9 lakh and you take
have higher deductions
deductions worth just
and exemptions. The new
Rs 2 lakh, the new regim
regime is ideal for e
works out better. But if
entry-level salary earners,
you claim deductions of
ultra-rich earning over
Rs 5.5 crore, Rs 3 lakh, the old
and retirees. regime is better.

New vs old income tax regimes:

How to take your pick
The choice between the two regimes will depend on
two key numbers: your taxable income and the amount
of deductions you claim. The Equaliser amount here
refers to the level of deductions claimed, where it makes
no difference to the tax you pay, irrespective of the
regime you choose. If your income is Rs 5.5 crore
and above, choose the new regime.

IF YOUR SALARY IS Rs 9 LAKH

Lower Higher
Equaliser^
deductions deductions
Deductions under
the old regime 2,00,000 2,62,500 3,00,000
Tax under old
regime 54,600 41,600 33,800
Tax under new
regime 41,600 41,600 41,600
New or old regime? New Old
No
(savings: (savings:
difference
13,000) 7,800)

IF YOUR SALARY IS RS 16 LAKH

Lower Higher
Equaliser^
deductions deductions
Deductions under
the old regime 3,50,000 4,25,000 4,75,000
Tax under old
regime 1,95,000 1,71,600 1,56,000
Ta under new
regime 1,71,600 1,71,600 1,71,600
New or old regime? New Old
No
(savings: (savings:
difference
23,400) 15,600)

IF YOUR SALARY IS RS 5.5 CRORE**

Lower Higher
Equaliser^
deductions deductions
Deductions
under the old 3,00,000 NA 5,00,000
regime
Tax under old
regime 2,31,13,818 NA 2,30,28,330
Tax under new
regime 2,10,40,500 NA 2,10,40,500
New or old New (savings: New (savings:
NA
regime? 20,73,318) 19,87,830)

All amounts in rupees

Includes surcharge and cess
^Equaliser: No difference between old and new regime,
irrespective of deduction amount; Standard deduction taken
into account for both regimes
*Due to rebate on taxable incomes of up to Rs 7 lakh and
standard deduction for new regime
#Due to rebate on taxable incomes of up to Rs 5 lakh
**New regime will be beneficial for those with incomes
of Rs 5.5 crore and above
Powered by EY India, Moneycontrol Research

WHAT ARE THE EXEMPTIONS

IN THE NEW REGIME?

The new tax regime is not entirely exemption-

free. It has done away with 70-odd exemptions
and deductions available under the old regime,
but certain benefits are still allowed.

Life insurance
Employer’s maturity proceeds
contribution of are eligible for tax
up to 10% of your relief under Section
salary to NPS gets 10 (10D) even under
you tax relief the new regime,
under Section but subject to
80CCD (2). conditions.

CAN YOU SWITCH BETWEEN

OLD AND NEW REGIMES
EVERY YEAR?

switch
ividuals can
Salaried ind g imes every y
ear.
tw o ta x re
between the n can switch
to the old
si n e ss p e rs o e only
A bu to the new regim
a n d b a ck
regime t every year.
once and no

SELF-EMPLOYED? ARE YOU SALARIED?

Estimate your tax liability
carefully under the two
systems at the time of filing
returns because you
cannot switch between
the two regimes
every year.
The best time to
choose is at the beginnin
g
of the financial year.
Inform your employer at
the time of submitting
proposed investment
declarations.

To understand further,
read our comprehensive
guide, packed with
more examples, here.