Opting for the old tax regime can yield savings of up to Rs 48,100 for individuals earning Rs 15 lakh annually, provided they maximize available deductions.
Let’s analyzes the tax implications for individuals earning an annual salary of Rs 15 lakh under the old and new tax regimes in India. It highlights the potential savings available through deductions in the old regime and provides a detailed comparison of tax liabilities under both systems following the adjustments made in the Union Budget of February 2025.
Tax Calculations
- Old Tax Regime:
- Tax slabs: 0% for income up to Rs 2.5 lakh, 5% for Rs 2.5 lakh to Rs 5 lakh, 20% for Rs 5 lakh to Rs 10 lakh, and 30% for income above Rs 10 lakh.
- Deductions available include:
- Standard Deduction: Rs 50,000
- Section 80C: Rs 1,50,000
- Section 80D: Rs 75,000
- Home Loan Interest: Rs 2,00,000
- Additional NPS Deduction: Rs 50,000
- Total deductions can amount to Rs 5.25 lakh, plus HRA exemption of Rs 3 lakh, resulting in a net taxable income of Rs 6.75 lakh and a final tax liability of Rs 49,400.
- New Tax Regime:
- Tax slabs: 0% for income up to Rs 4 lakh, 5% for Rs 4 lakh to Rs 8 lakh, 10% for Rs 8 lakh to Rs 12 lakh, and so on, with a maximum rate of 30% for income above Rs 24 lakh.
- Only a standard deduction of Rs 75,000 is allowed.
- This results in a net taxable income of Rs 14.25 lakh and a final tax liability of Rs 97,500.
Important Details & Evidence
- The comparison indicates that the old tax regime can save taxpayers earning Rs 15 lakh approximately Rs 48,100 compared to the new regime.
- The old regime’s deductions are particularly beneficial for individuals with significant investments in tax-saving instruments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), and home loans.
- HRA exemptions are crucial; however, conditions apply for claiming both HRA and home loan benefits, particularly regarding the ownership and rental status of properties.
Conditions for Claiming HRA and Home Loan Benefits
Taxpayers can claim both benefits if they:
- Live in a rented property while owning another house.
- Own a house that is under construction or located in a different city.
- Rent out their owned house while living in a different rented property.
Conversely, they cannot claim both if:
- They own and reside in the property for which they are paying home loan interest without paying rent.
- They own property in the same city where they rent accommodation without valid justification.
Finally
The analysis demonstrates that individuals earning Rs 15 lakh annually may benefit more from the old tax regime if they can maximize deductions and exemptions through strategic investments. The choice between tax regimes ultimately depends on individual financial situations, investment habits, and eligibility for various deductions, particularly concerning HRA. Taxpayers are encouraged to evaluate their circumstances carefully to make an informed decision that aligns with their financial goals.
