| Tax Component | Old Tax Regime | New Tax Regime |
|---|---|---|
| Gross Total Income | - | - |
| Standard Deduction | - | - |
| Chapter VI-A & Other Deductions | - | Nil (Disallowed) |
| Net Taxable Income | - | - |
| Calculated Base Tax | - | - |
| Section 87A Tax Rebate | - | - |
| Health & Education Cess (4%) | - | - |
| Total Tax Liability | - | - |
How Old vs New Tax Regime Calculations Work
India's dual tax regime system lets taxpayers calculate income tax using either concessional slab rates without deductions or traditional slab rates with extensive deduction benefits:
- Gross Income Computation: Add your salary income, bonuses, interest earnings, and other revenue streams.
- Standard Deduction: Salaried taxpayers receive a flat 75,000 INR standard deduction in the New Regime, or 50,000 INR in the Old Regime.
- Applying Deductions (Old Regime): Subtract allowable Section 80C, 80D, HRA, NPS, and Home Loan interest (Section 24b) to obtain Net Taxable Income.
- Applying Slab Rates & Section 87A Rebate: Compute tax per slab. Under the New Regime, zero tax is payable if taxable income is up to 7,00,000 INR (effectively 7,75,000 INR for salaried). Under the Old Regime, zero tax applies up to 5,00,000 INR (effectively 5,50,000 INR for salaried).
- Health & Education Cess: A mandatory 4% cess is added to the net calculated tax amount.
Income Tax Slab Comparison Reference
Applicable slab rates for individual taxpayers below 60 years of age:
| Income Slab Range | New Tax Regime Rate | Old Tax Regime Rate |
|---|---|---|
| 0 – 2,50,000 INR | Nil (0%) | Nil (0%) |
| 2,50,001 – 3,00,000 INR | Nil (0%) | 5% |
| 3,00,001 – 7,00,000 INR | 5% (Full Rebate up to 7L) | 5% (up to 5L) / 20% (5L-7L) |
| 7,00,001 – 10,00,000 INR | 10% | 20% |
| 10,00,001 – 12,00,000 INR | 15% | 30% |
| 12,00,001 – 15,00,000 INR | 20% | 30% |
| Above 15,00,000 INR | 30% | 30% |
Breakeven Point Analysis:
If your total deductions (Section 80C + 80D + HRA + Home Loan Interest) exceed 3.75 Lakh to 4.25 Lakh INR (depending on your salary bracket), the Old Regime usually results in lower tax. Otherwise, the New Regime is more tax-efficient.
Frequently Asked Questions
Which tax regime is set as the default?
The New Tax Regime is the default regime under Section 115BAC. Taxpayers who wish to file under the Old Tax Regime must deliberately select it while filing their Income Tax Return (ITR).
Can salaried employees switch between Old and New regimes each year?
Yes. Salaried individuals with income from salary, house property, and other sources (no business/profession income) can freely choose the most beneficial regime each financial year at the time of filing their ITR.
Is Standard Deduction available in both regimes?
Yes. Salaried employees and pensioners receive a 75,000 INR standard deduction in the New Tax Regime and a 50,000 INR standard deduction in the Old Tax Regime. Self-employed individuals cannot claim standard deduction in either regime.
What is Marginal Relief under Section 87A for the New Regime?
If your taxable income marginally exceeds 7,00,000 INR (e.g., 7,15,000 INR), the tax payable is capped to not exceed the income earned above 7,00,000 INR, preventing high tax on small salary increases.