With new announcement salaried folks are confuse to accept the change, the many question comes in mind ? 1. Should i change my regime or not ? 2. Will i get option to change back to Old regime if i opt New regime? 3. With higher salary tax burden is high in new regime even if i have ~4-5 lakhs of declaration including (House Loan , 80C , 80D , NPS and others) still i should go with new or old. 4. are my investments having no use with new tax regime.
See while you can clarify the factual base with your CA as he/she is the right person to asses your tax liability and the right option to go for. However for the people who does not have dedicated CA to asses the tax profile below clarification will help you to choose the best.
Based on the revised tax laws in India for the Financial Year 2025-26 (Assessment Year 2026-27), a person with a salary of ₹15 lakh needs to evaluate both the New Tax Regime and the Old Tax Regime to determine which is more beneficial.
Here's a breakdown to help in making the decision:
New Tax Regime:
Tax Slabs for FY 2025-26:
Up to ₹4,00,000: Nil
₹4,00,001 - ₹8,00,000: 5%
₹8,00,001 - ₹12,00,000: 10%
₹12,00,001 - ₹16,00,000: 15%
₹16,00,001 - ₹20,00,000: 20%
₹20,00,001 - ₹24,00,000: 25%
Above ₹24,00,000: 30%
Standard Deduction: A standard deduction of ₹75,000 is available for salaried individuals under this regime.
Deductions: Very limited deductions are available under the new regime. Key deductions include the employer's contribution to the National Pension Scheme (NPS) under Section 80CCD(2), deduction for family pension, and certain others like those under Section 80CCH and 80JJAA. Most other popular deductions like those under Section 80C (PF, LIC, ELSS), Section 80D (medical insurance), HRA, and LTA are not available.
Tax Calculation Example (₹15 lakh salary):
Gross Salary: ₹15,00,000
Less: Standard Deduction: ₹75,000
Taxable Income: ₹14,25,000
Tax Calculation:
Up to ₹4,00,000: Nil
₹4,00,001 - ₹8,00,000 (₹4,00,000 * 5%): ₹20,000
₹8,00,001 - ₹12,00,000 (₹4,00,000 * 10%): ₹40,000
₹12,00,001 - ₹14,25,000 (₹2,25,000 * 15%): ₹33,750
Total Tax: ₹20,000 + ₹40,000 + ₹33,750 = ₹93,750
Add: Health and Education Cess @ 4%: ₹93,750 * 4% = ₹3,750
Total Tax Liability: ₹97,500
Old Tax Regime:
Tax Slabs for FY 2025-26 (for individuals below 60 years):
Up to ₹2,50,000: Nil
₹2,50,001 - ₹5,00,000: 5%
₹5,00,001 - ₹10,00,000: 20%
Above ₹10,00,000: 30%
Standard Deduction: A standard deduction of ₹50,000 is available for salaried individuals under this regime.
Deductions: A wide range of deductions and exemptions are available, which can significantly reduce taxable income. These include:
Section 80C: Investments in PF, PPF, LIC, ELSS, etc. (up to ₹1.5 lakh)
Section 80D: Medical insurance premiums
House Rent Allowance (HRA): Exemption based on certain conditions.
Leave Travel Allowance (LTA): Exemption for travel expenses.
Section 80CCD(1B): Additional contribution to NPS (up to ₹50,000)
Home Loan Interest (Section 24B): Deduction for interest paid on a home loan.
Many other deductions under Chapter VI-A.
Tax Calculation Example (₹15 lakh salary, assuming maximum possible deductions):
Gross Salary: ₹15,00,000
Less: Standard Deduction: ₹50,000
Less: Section 80C: ₹1,50,000
Less: Section 80D: ₹25,000 (example)
Less: NPS Deduction (80CCD(1B)): ₹50,000
Less: Home Loan Interest: ₹2,00,000 (example)
Less: HRA Exemption: ₹1,00,000 (example)
Total Deductions: ₹5,75,000
Taxable Income: ₹15,00,000 - ₹5,75,000 = ₹9,25,000
Tax Calculation:
Up to ₹2,50,000: Nil
₹2,50,001 - ₹5,00,000 (₹2,50,000 * 5%): ₹12,500
₹5,00,001 - ₹9,25,000 (₹4,25,000 * 20%): ₹85,000
Total Tax: ₹12,500 + ₹85,000 = ₹97,500
Add: Health and Education Cess @ 4%: ₹97,500 * 4% = ₹3,900
Total Tax Liability: ₹101,400
Which Regime to Choose and Why:
For a person with a ₹15 lakh salary, the choice between the new and old tax regime depends heavily on the amount of deductions and exemptions they can claim under the old regime.
If the individual avails significant deductions and exemptions (like investments under Section 80C, medical insurance under 80D, HRA, home loan interest, etc.) that collectively reduce their taxable income significantly, the Old Tax Regime might result in a lower tax liability despite having higher tax rates at certain income levels.
If the individual does not have many tax-saving investments or eligible expenses, or if they prefer a simpler tax calculation without the hassle of tracking and claiming various deductions, the New Tax Regime with its lower tax rates at certain income levels (up to ₹15 lakh) and a higher standard deduction of ₹75,000 might be more beneficial.
In the example calculations above:
Under the New Tax Regime, the total tax liability is ₹97,500.
Under the Old Tax Regime with substantial assumed deductions, the total tax liability is ₹101,400.
In this specific scenario with significant assumed deductions, the new tax regime appears slightly more beneficial. However, if the individual's actual deductions under the old regime are higher, the old regime could lead to more tax savings.
Recommendation:
The best approach for a person with a ₹15 lakh salary is to:
Calculate their potential taxable income under both regimes.
Estimate the total deductions and exemptions they can realistically claim under the Old Tax Regime.
Compare the tax liabilities under both scenarios.
Based on this comparison, they should choose the regime that results in a lower tax outgo. Many online tax calculators are available that can help in this comparison by inputting salary details and potential deductions.
It's important to note that the New Tax Regime is the default regime from FY 2024-25 onwards. If an individual wants to opt for the Old Tax Regime, they need to explicitly choose it while filing their income tax return. For those with business income, a specific form (Form 10-IEA) might be required to opt out of the new regime.
Considering your salary is below ₹12.75 Lakh with no immediate expectation of it exceeding ₹15 Lakh, the New Tax Regime is likely the more beneficial option without much deliberation. Even with meticulous declaration of all your investments and paperwork throughout the year, the Old Tax Regime will likely result in a higher tax liability for your income level. It's highly recommended to utilize the online tax calculator available on the official Income Tax Department website to see the surprising difference for yourself.
Example 1
Salary 12.90 Lakh with old you have to pay 93K tax in old even if you have exemption worth 4Lakh as your total taxable become 8.85 Lakh while with new you are just paying 15600/- Since your taxable income after exemption is 121500/-
