Income Slabs

• Income Slabs define how much tax an individual will pay based on their income.
• New Regime: In the new tax regime, income up to ₹3 lakh is tax-free, and as income increases, it gets taxed at increasing rates. For example, income between ₹3 lakh and ₹7 lakh is taxed at 5%, while income above ₹15 lakh is taxed at the highest rate of 30%.
• Old Regime: In the old tax regime, income up to ₹2.5 lakh is tax-free. Income between ₹2.5 lakh and ₹5 lakh is taxed at 5%, and higher income brackets are taxed at 20% and 30%, depending on the amount.
• Key Difference: The New Regime starts at ₹3 lakh for the tax-free threshold, while the Old Regime starts at ₹2.5 lakh.

Standard Deduction

• Standard Deduction is a fixed amount deducted from your taxable income. It reduces the total amount of income that is subject to tax.
• New Regime: Offers a higher standard deduction of ₹75,000 for salaried employees and pensioners. This reduces the income that is taxed.
• Old Regime: Offers a ₹50,000 standard deduction. This also reduces the taxable income but is slightly lower than the new regime.
• Example: If your salary is ₹6 lakh and you're under the Old Regime, you can subtract ₹50,000 from ₹6 lakh, reducing your taxable income to ₹5.5 lakh.

Deductions and Exemptions

• Deductions and Exemptions allow you to reduce your taxable income by making certain investments or claiming certain expenses, which leads to a reduction in tax liability.
• New Regime: This regime does not allow any deductions or exemptions. This simplifies the tax filing process but may result in higher taxes for those with significant eligible expenses or investments.
• Old Regime: Allows for various deductions under sections like:
  • Section 80C: Deduction of up to ₹1.5 lakh for investments in PPF, EPF, LIC premiums, tax-saving FDs, etc.
  • Section 80D: Deduction for premiums paid on health insurance (up to ₹25,000 for individuals and ₹50,000 for senior citizens).
  • House Rent Allowance (HRA): If you live in rented accommodation, you can claim HRA as a deduction based on your salary, the rent you pay, and the city you live in.
• Example: If you invest ₹1 lakh in PPF (under Section 80C) and pay ₹25,000 as health insurance (under Section 80D), your total taxable income will decrease by ₹1.25 lakh, reducing the tax liability.

Rebate (Section 87A)

• Section 87A offers a rebate on tax for individuals earning below a certain threshold.
• New Regime: For income up to ₹7 lakh, the tax is effectively zero because of the Section 87A rebate. This means that individuals with income up to ₹7 lakh will not pay any tax.
• Old Regime: For income up to ₹5 lakh, the rebate ensures that the net tax liability is zero (effectively tax-free). If your taxable income is ₹5 lakh or less, you don’t need to pay any tax.
• Key Difference: In the New Regime, the rebate threshold is ₹7 lakh, whereas, in the Old Regime, it is ₹5 lakh.

Tax Simplicity

• New Regime: Simpler to navigate because it does not require tracking investments or exemptions. The tax rates are clear, and you don't need to plan for tax-saving investments.
• Old Regime: Requires tax planning to maximize deductions and exemptions, making it more complex but potentially more beneficial for individuals with significant deductions (e.g., insurance, home loan interest, etc.).

Best for

• New Regime: This regime is best for individuals who have minimal tax-saving investments or prefer a simpler filing process without having to track deductions and exemptions.
• Old Regime: Best for individuals who have significant deductions and exemptions (e.g., through 80C investments, HRA claims, etc.), as it allows them to reduce their taxable income and potentially pay less tax.

Basic Deductions (Section 80C)

• Maximum deduction: ₹1.5 lakh per financial year.
• Includes investments in Life Insurance Premium, PPF, EPF, NSC, 5-year fixed deposit with banks, and ELSS Mutual Funds.

Medical Insurance (Section 80D)

• For self, spouse, and children:
  • ₹25,000 (if below 60 years of age).
  • ₹50,000 (if senior citizens, above 60 years).
• For parents:
  • ₹25,000 (if parents are below 60 years).
  • ₹50,000 (if parents are senior citizens, above 60 years).
• Total maximum limit:
  • ₹50,000 (self/family below 60 years and parents below 60 years).
  • ₹75,000 (self/family below 60 years and senior citizen parents).
  • ₹1 lakh (self/family and parents both senior citizens).

Education Loan Interest Paid (Section 80E)

• No maximum limit for interest paid on education loans.
• Deduction is available for up to 8 years or until the loan is repaid, whichever is earlier.

Employee Contribution to NPS (Section 80CCD)

• Section 80CCD(1): The contribution made by the employee is limited to 10% of salary (Basic + DA) or ₹1.5 lakh (whichever is lower).
• Section 80CCD(2): Employer’s contribution to NPS can be up to 14% of salary (for government employees) or 10% for others.
• Section 80CCD(1B): Additional deduction of up to ₹50,000 for contributions to NPS, over and above the ₹1.5 lakh limit under 80C.

Deposit Interest Received (Section 80TTA)

• Deduction on interest earned from savings bank accounts.
• Maximum deduction: ₹10,000 (for individual taxpayers below 60 years and Hindu Undivided Families).

Donations Given (Section 80G)

• Deduction for donations to charitable institutions.
• Maximum deduction varies, generally 50% of the donation amount is allowed as a deduction.

Housing Loan Interest Paid (Section 80EEA)

• Deduction for interest on housing loans for first-time homebuyers.
• Maximum deduction: ₹1.5 lakh per year on home loan interest under Section 80EEA.
• Available if the loan is sanctioned between April 1, 2019 and March 31, 2022 and the value of the house is ₹45 lakh or less.
• After March 31, 2022, new loans are not eligible for this benefit.