Post yesterday's budget, does it make sense to move from the old tax regime to the new tax regime. My income is above Rs 20 Lacs per annum. How much income tax will I save given that I take the benefit of all the tax saving schemes.

Ans: If person earn income from salary of Rs.60,00,000, old regime will be beneficial as per proposal of Budget 2023. If person is paying housing loan and making tax saver investment; old tax regime will be more beneficial after taking deduction of Rs 2,00,000 for interest on housing loan + Rs1,50,000 for 80C+ Rs.20,000 for mediclaim + Rs.50,000 for salary standard deduction.

Ans: This year as also next year, old tax regime will be beneficial to you assuming you avail the 80C and 80CCD(1B)benefits.

Ans: Choosing between the old and new tax regimes depends on your financial situation and how much you utilise tax-saving deductions and exemptions. Here's a comparison to help guide your decision:

Old Tax Regime:

Pros:

• Offers numerous deductions and exemptions like Section 80C (up to Rs 1.5 lakh), HRA, LTA, and standard deductions (Rs 50,000)
• Suitable if you maximise deductions and exemptions
• Better for those with home loans, insurance premiums, and investments in tax-saving instruments

Cons:

• Requires more tax planning
• If your investments and expenses don't lead to substantial deductions, the tax liability can be higher

New Tax Regime:

Pros:

• Simplified tax structure with lower tax rates
• No need for tax-saving investments to reduce tax liability
• Best for those who have fewer deductions and exemptions

Cons:

• No deductions or exemptions available
• You lose benefits like HRA, standard deduction, and Section 80C benefits

Tax Rate Comparison:

In the new regime, the tax slabs are lower, but you forego deductions:

• Up to Rs 2.5 lakh: Nil
• Rs 2.5 - 5 lakh: 5%
• Rs 5 - 7.5 lakh: 10%
• Rs 7.5 - 10 lakh: 15%
• Rs 10 - 12.5 lakh: 20%
• Rs 12.5 lakh and above: 25%

In the old regime, the tax slabs are:

• Up to Rs 2.5 lakh: Nil
• Rs 2.5 - 5 lakh: 5%
• Rs 5 - 10 lakh: 20%
• Rs 10 lakh and above: 30%

Your Situation:

Given your salary of Rs 12.5 lakh:

If you're making full use of deductions (like Rs 1.5 lakh under 80C, Rs 50,000 standard deduction, and others like home loan interest, HRA, etc.), the old regime might be beneficial.

If you're not able to claim significant deductions, the new regime might result in lower tax liability due to the lower slab rates.