What is the most advantageous tax regime for you — the newly enacted or the old regime?

A number of proposals were announced by Finance Minister Nirmala Sitharaman on personal taxation. Some were intended to make the newly enacted personal income tax regime more attractive.

By doing so, both citizens and the government are able to benefit from the proposed tax regime. It is up to the former to declare exemptions and provide proof; the government does not have to track them.

In FY24, anyone with an annual income of up to Rs 7 lakh will be exempt from income tax under the proposed tax regime, announced Finance Minister Nirmala Sitharaman. In the current fiscal, it was Rs 5 lakh.

Those with an annual income of more than Rs 7 lakh are now subject to the following tax slabs following the implementation of the post-reform regime.

On IncomeRate
Up to 3,00,000Nil
From 3,00,001 to 6,00,0005%
From 6,00,001 to 9,00,00010%
From 9,00,001 to 12,00,00015%
From 12,00,001 to 15,00,00020%
Above 15,00,00030%

The above slabs mean the Finance Minister also reduced the number of slabs to five. 

Furthermore, the reformed tax regime has extended the standard deduction to salaried individuals and pensioners, including family pensioners. According to the proposal, salaried individuals will now get a standard deduction of Rs 50,000, and pensioners Rs 15,000. 

Union Budget 2023 proposed no significant changes to the old tax regime.

A surcharge rate of 37% has been reduced to 25% for individuals earning over Rs 2 crore (also known as the super-rich tax).

Putting both the old and newly enacted tax regimes side by side, here’s a comparison.

Under the old tax regime, the tax slabs were and continue to remain as below:

Total IncomeRate
Up to Rs 2,50,0000%
Rs 2,50,000 to Rs 5,00,0005%
Rs 5,00,000 to Rs 10,00,00020%
Above Rs 10 lakh30%

For the coming fiscal year, the following is a calculation of the tax liability of individuals earning a salary of Rs 7 lakh, Rs 10 lakh, and Rs 15 lakh under the old and reformed tax regimes.

Particulars Rs 7 lakh
Old Regime
Rs 7 lakh
New Regime (Revised)
Rs 10 lakh
Old Regime
Rs 10 lakh
New Regime (Revised)
Rs 15 lakh
Old Regime
Rs 15 lakh
New Regime (Revised)
Gross Income7,00,0007,00,00010,00,00010,00,00015,00,00015,00,000
Standard Deduction50,00050,00050,00050,00050,00050,000
Deductions u/Sec 80C1,50,0001,50,000 1,50,000 
Taxable Income5,00,0006,50,0008,00,0009,50,00013,00,00014,50,000
Tax PayoutNilNil72,50052,5002,02,5001,40,000

According to the changes in tax slabs announced in Budget 2023, you can see the tax payable in the above table.

The newly enacted tax regime will benefit taxpayers regardless of their salary level, even if they only take advantage of deductions under Section 80C.

However, an individual may still be able to get a better deal under the old tax regime. This is because they can take advantage of most of the exemptions offered under the old tax regime.

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