What are the main differences between the old and new tax regimes? How might tax liabilities change? Rebates & tandard deductions Explained

Understanding the revised tax regime is crucial for effective personal financial planning. With lower tax rates and a simplified structure, the new regime could benefit many taxpayers, especially those with straightforward income sources. Utilizing tools like the income tax calculator can provide clarity on individual tax liabilities. Ultimately, taxpayers should carefully evaluate their options to determine which tax regime aligns best with their financial circumstances, ensuring they take full advantage of available rebates and deductions.

The revised tax regime for the financial years 2024-25 and 2025-26, focusing on the income tax slabs applicable to various salary ranges:

provides a comprehensive breakdown of the new tax slabs for the upcoming financial years. The new regime offers lower tax rates but removes several deductions and exemptions available in the old regime. For example, individuals earning between INR 1,375,000 and INR 2,675,000 will find their tax rates structured in a way that may result in lower overall tax payments compared to the previous system.

2. Rebate and Standard Deduction

A significant aspect of the new tax regime is the introduction of a rebate for individuals earning up to INR 7,00,000, which effectively makes their tax liability zero. Additionally, the standard deduction of INR 50,000 is applicable, reducing the taxable income further. This means that those earning a salary can benefit from a straightforward reduction in their taxable income before calculating their tax obligations.

3. Comparison of Tax Regimes

The key differences between the old and new tax regimes.

While the old regime allows for various deductions, such as under Sections 80C and 80D, the new regime simplifies the process by offering lower tax rates but fewer exemptions. Taxpayers must assess which regime works best for their financial situation, especially if they have significant deductions that they would lose under the new structure.

The revised tax regime has significant implications for various income brackets. For instance, individuals earning INR 1,375,000 will pay a different tax amount compared to those making INR 2,675,000.