Many changes have been announced in the budget 2023. After these changes, the new tax regime has become very attractive for people with a salary of up to Rs 7.5 lakh. Because they will not have to pay any tax up to this amount. Let’s know about it in detail.
When your income exceeds this level, you will have to pay tax on income above three lakh rupees. This is because the rebate provided by section 87A will not be available to you, if your income is more than Rs 7 lakh.
So, does the old income tax regime provide an opportunity to save more tax? When your income increases from Rs 9 lakh per annum to Rs 12 lakh per annum.
The answer is yes, but it will depend on how much you are able to use the deduction available under the old tax regime. Most of the taxpayers would like to know that what is the minimum amount of deduction they would need under the old tax regime, so that they can match the tax liability under the new tax regime.
Apart from this, if you can claim deduction above this level, then you should continue with the old tax regime. So, let us see how it works for annual income of 9 lakhs, 10.5 lakhs and 12 lakhs.
On annual income of 9 lakhs
If your annual income is Rs 9 lakh, then there is no other way to save more tax than by claiming standard deduction of Rs 50,000. You will have to pay income tax of Rs 40,000 under the new tax regime. If you opt for the old tax regime, and claim a deduction of Rs 2,12,500, you will pay the same amount of tax under the old tax regime.
If you want to save more tax, it is possible only in the old tax regime. You can check your eligibility for different deductions. If you claim a deduction of Rs 2.13 lakh or more, your tax savings will be higher. If you claim a total deduction of Rs 4 lakh, then your tax can also be zero.
On annual income of Rs 10.5 lakh
If your annual income is Rs 10.5 lakh, then you will have to pay income tax of Rs 60,000 under the new tax regime. The only way to save this is to opt for the old tax regime and limit the deduction to Rs 2,62,500. In this case, you will pay the same tax as in the old tax regime.
The more tax you want to save, the more you have to claim the deduction. If you claim a total deduction of Rs 5.5 lakh, then your tax will be zero.
On annual income of 12 lakhs
If your annual income is 12 lakhs, then you will have to pay Rs 60,000 under the new income tax regime. To pay the same tax under the old tax regime, you need to claim a deduction of at least Rs 3 lakh.
The more deductions you claim, the higher your tax savings. If your total deduction reaches Rs 7 lakh, then you do not have to pay any tax.
