New or old… know which tax system is beneficial for you and how to save more

The financial year 2022-23 (FY23) has ended and with this month the new financial year 2023-24 (FY24) has started. With this, the new season of filing Income Tax Return is going to start soon. Everyone, especially those who come in the taxable slab, make every possible effort to save maximum tax. This task was no less complicated than it already was. Now two types of tax system has increased the difficulties for taxpayers. Let us know which tax regime is better for you…

Government’s emphasis on new tax system

First of all, you should know that there are two options (Income Tax Regime) available to pay income tax. One option is the already existing old tax regime ie Old Tax Regime, while the other option is the new tax regime ie New Tax Regime. The government is trying to make the new tax system attractive, because in future the government plans to have only one tax system. For this reason, some changes were made in the new tax system in the budget in the month of February, so that it can be made more attractive. However, the presence of two options creates confusion in front of the taxpayers as to which option is better for them to choose.

You can take help of this tax calculator

We are trying to make it easy for you. The Income Tax Department has also introduced a tax calculator, which is available on its website, to help taxpayers choose the right option out of the two. With the help of this also, you can choose a better option for yourself by comparing your savings under both the tax regimes.

You can claim this in the old system

First of all, let’s assume that your gross salary is Rs 10 lakh per annum. You have bought your house by taking a home loan and pay an interest of Rs 0.2 lakh every year. After standard deduction, your taxable income comes down to Rs 9,50,000 in both the tax regimes. In the Old Tax Regime, the money paid as home loan interest will be deducted from the income, so in the old system, your Gross Total Income will be Rs 7 lakh 50 thousand. While in the new tax regime it will remain Rs 9,50,000 as there is no facility to claim exemption on home loan interest in this option. After claiming the deduction of Rs 1.50 lakh, the total income in the old regime will be Rs 6 lakh, whereas in the new tax regime it will be Rs 9.5 lakh.

There will be so much savings in the old system

In the old tax regime, the total tax liability on Rs 6,00,000 will be Rs 33,800, whereas in the new tax regime, your tax liability will be Rs 54,600. In this case, by choosing the old tax regime, you will save Rs 20,800.

Now let us assume that you live on rent in the city where you are working now. While you had earlier taken a house in some other city, which you bought by taking a home loan and your family members are still living there. In such a situation, you can claim HRA along with home loan interest exemption.

Suppose you get Rs 1 lakh 60 in a year as HRA from the company. In such a situation, after taking advantage of this, your tax liability will become zero in the old tax system. This means that in comparison to the new tax regime, there will be a saving of Rs 54,600 in the form of tax by opting for the old regime. However, in this case the old tax regime is beneficial for you only if you claim deductions of at least Rs 3 lakh.

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