Old and New Tax Regime: A Comparison

The Old and New Tax Regimes present distinct frameworks for taxation of income. Under the old regime, taxpayers benefit from various exemptions and exemption limits, tailored to specific categories. Notably, the tax rebate limit provides additional relief. Conversely, the new regime simplifies the tax structure by eliminating exemptions while introducing new provisions. This shift aims to streamline the taxation process, offering taxpayers a simplified and potentially more efficient system. The decision between the old and new regimes requires careful consideration of your financial circumstances and preferences. This is because both avenues aim to strike a balance between revenue collection and taxpayer ease.

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Key Takeaways

The old tax regime allows deductions like HRA, LTA, and Section 80, while the New Regime doesn't offer these deductions

Exemption limits vary in the old regime based on age, while the New Regime has a uniform limit of ₹3 Lakhs

Tax rebate limit is ₹5 Lakhs in the old regime and ₹7 Lakhs in the new regime, providing relief to taxpayers

New regime introduces favourable provisions like higher leave encashment limit and family pension deductions

The new tax regime is now the default option, but the old regime still exists, giving taxpayers the flexibility to choose

Understanding the differences helps make an informed decision based on taxable income and investments

Evaluate expenses, use online tax calculators, and choose the regime that best suits your financial situation

Frequently Asked Questions
The higher exemption limit of ₹3 Lakhs means you may not incur income tax liability if your earnings stay below this threshold.
The limit now stands at ₹25 Lakhs, offering a substantial benefit compared to the previous ₹3 Lakhs, potentially reducing your taxable income significantly.
Deductions like HRA, LTA, and Section 80 (up to ₹1.5 Lakhs) are applicable only in the old regime, affecting your taxable income.
While the new regime is now default, it is wise to assess your income, investments, and potential deductions. This could help you determine whether sticking with the default or choosing the old regime is more beneficial.
Consider deductions, investment portfolio, long-term financial goals, and potential changes in taxable income to make an informed decision between the two regimes.
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