• Notification Date: 01-05-2023
• Notification No: N/A

Old vs New Income Tax Regime - Earnings and Deductions

As the tax season comes around, taxpayers in India must decide whether to opt for the new or old tax regime. Mrin Agarwal, Financial Educator & Director, Finsafe India sheds light on the key differences between the two. 

Under the new tax regime, taxpayers can only claim a standard deduction and contribute to the National Pension Scheme (NPS) CCD (2). In contrast, the old tax regime allows for several exemptions, including those under Sections 80C, 80D, and 24. 

If you have a higher income and more deductions, the old regime may be better suited for you. However, if you prefer simplicity and don't have many deductions, the new regime may be the way to go. 

To help you make an informed decision, Finsafe India recommends using the income tax calculator available on the tax department's website. 

Agarwal said, “The new regime is actually very simple, because it only allows for a couple of deductions, the first one being the standard deduction, and the second one being the National Pension Scheme (NPS) CCD (2) contribution, which means this is the employer contribution to NPS. So how do you figure out well, there is a calculator on the income tax website that you can use to figure out where you are paying a lower amount of tax.” 

This handy tool allows you to compare your tax liability under both regimes and choose the one that results in lower taxes.