Need Expert Advice?Our Gurus Can Help

Hardik Parikh | Answer |Ask -Follow

Tax, Mutual Fund Expert - Answered on Apr 13, 2023

Hardik Parikh is a chartered accountant with over 15 years of experience in taxation, accounting and finance.
He also holds an MBA degree from IIM-Indore.
Hardik, who began his career as an equity research analyst, founded his own advisory firm, Hardik Parikh Associates LLP, which provides a variety of financial services to clients.
He is committed to sharing his knowledge and helping others learn more about finance. He also speaks about valuation at different forums, such as study groups of the Western India Regional Council of Chartered Accountants.... more

Asked by Anonymous - Apr 12, 2023Hindi

Hello sir, My annual income is 34L per annum. I have a home loan where I can claim 1.5L for principal and 2L for interest. Have a health insurance premium of 23000 and a life insurance of around 50K per annum. Could you kindly suggest which Regime would be suitable for me. Thank you

Ans: Hello,

Based on the information you've provided, let's first calculate your taxable income under the Old Tax Regime. Your annual income is INR 34 lakhs. From this, we can subtract the home loan principal (INR 1.5 lakhs) and interest (INR 2 lakhs), health insurance premium (INR 23,000), and life insurance premium (INR 50,000) as deductions. This brings your taxable income to:

34,00,000 - 1,50,000 - 2,00,000 - 23,000 - 50,000 = INR 29,77,000

Now, let's calculate your tax liability under the Old Tax Regime:

Up to INR 2.5 lakh: Nil
INR 2.5 lakh to INR 5 lakh: 5% of (5,00,000 - 2,50,000) = INR 12,500
INR 5 lakh to INR 7.5 lakh: 20% of (7,50,000 - 5,00,000) = INR 50,000
INR 7.5 lakh to INR 10 lakh: 20% of (10,00,000 - 7,50,000) = INR 50,000
INR 10 lakh to INR 12.5 lakh: 30% of (12,50,000 - 10,00,000) = INR 75,000
INR 12.5 lakh to INR 15 lakh: 30% of (15,00,000 - 12,50,000) = INR 75,000
Above INR 15 lakh: 30% of (29,77,000 - 15,00,000) = INR 4,43,100
Total tax liability under the Old Tax Regime: INR 12,500 + 50,000 + 50,000 + 75,000 + 75,000 + 4,43,100 = INR 7,05,600

Now, let's consider the New Tax Regime (assuming no deductions as they are not allowed):

INR 0-3 lakh: Nil
INR 3-6 lakh: 5% of (6,00,000 - 3,00,000) = INR 15,000
INR 6-9 lakh: 10% of (9,00,000 - 6,00,000) = INR 30,000
INR 9-12 lakh: 15% of (12,00,000 - 9,00,000) = INR 45,000
INR 12-15 lakh: 20% of (15,00,000 - 12,00,000) = INR 60,000
Above INR 15 lakh: 30% of (34,00,000 - 15,00,000) = INR 5,70,000
Total tax liability under the New Tax Regime: INR 15,000 + 30,000 + 45,000 + 60,000 + 5,70,000 = INR 7,20,000

Based on these calculations, it seems that the Old Tax Regime would be more suitable for you as it results in a lower tax liability (INR 7,05,600) compared to the New Tax Regime (INR 7,20,000).

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.