Old Regime vs New Regime of Taxation in India 2023: Important Pointers

  • Updated on: 22 Feb 2024
  • Published on: 17 Apr 2020
Old Regime vs New Regime of Taxation in India 2023: Important Pointers

Choosing between the old and new taxation regimes in India is a crucial decision to make since they have different impacts on your tax liability. While the old regime has its perks in the form of 70+ deductions and exemptions, the new tax regime offers some great benefits, too.

To understand what both these regimes mean, their differences and how you can choose between them, read on.

What is the New Tax Regime?

Introduced in 2020, this has comparatively fewer deductions and exemptions but better tax slabs. 

Important points to note:

  • Income up to ₹7 lakhs is now eligible for a full tax rebate, meaning you don’t have to pay any taxes
  • The basic tax exemption limit is ₹3 lakhs
  • The standard deduction of ₹50,000 is also available under this regime
  • The tax rate for HNIs is 39%
  • The leave encashment exemption limit is ₹25 lakhs
  • The new regime is the default regime from 2023-24 onwards
  • If you want to file a return under the old regime, you’ll need to switch at the time of filing by submitting a form

What is the Old Tax Regime?

The old regime has been in place long before the new one. 

Important points to note:

  • It offers 70+ deductions and exemptions to taxpayers under different heads
  • The old regime was the default option until now, wherein you can enjoy deductions of up to ₹1.5 lakhs under Section 80C alone
  • The basic exemption limit in this regime is lower than in the new regime
  • This regime still includes the standard deduction

Old or New Tax Regime: Which is Better?

Understanding the tax slabs, deductions and exemptions for both regimes is crucial. This information can help you understand the features of the old vs. new tax regime and make a smart choice. 

Tax Slabs:

Income SlabNew Tax RegimeOld Tax Regime
₹0 – ₹2,50,0000%0%
₹2,50,000 – ₹3,00,0000%5%
₹3,00,000 – ₹5,00,0005%5%
₹5,00,000 – ₹6,00,0005%20%
₹6,00,000 – ₹7,50,00010%20%
₹7,50,000 – ₹9,00,00010%20%
₹9,00,000 – ₹10,00,00015%20%
₹10,00,000 – ₹12,00,00015%30%
₹12,00,000 – ₹12,50,00020%30%
₹12,50,000 – ₹15,00,00020%30%

Disclaimer: The tax slabs for the new regime are applicable from 01/04/2023.

Deductions and Exemptions:

ParticularsNew Tax RegimeOld Tax Regime
Standard deductionAvailableAvailable
HRANot AvailableAvailable
LTANot AvailableAvailable
Interest on home loanNot Available (self-occupied/vacant property)Available (let-out property)Available
NPS (employer contribution)AvailableAvailable
Family Pension Income DeductionAvailableAvailable
Entertainment Allowance and Professional TaxNot AvailableAvailable
Deductions u/s 80CNot AvailableAvailable

Disclaimer: The above is not an exhaustive list of deductions and exemptions.

Tips to Choose Between the Old and New Tax Regime

A key difference between the new and old tax regime includes:

  • The old regime has fewer deductions and exemptions
  • The old regime also has an increased limit for tax-free income

To consider the old vs new regime, calculate your tax liability by considering all the deductions and exemptions you can claim under both regimes. This will give you your net taxable income. Based on that, you can calculate the tax you owe as per the applicable slab rate. 

In conclusion, computing your tax obligation will help you choose between the old or new tax regime with ease. You can also claim deductions for a personal loan under the old regime if you use the funds for specified purposes. 

If you fall short of funds during the tax-paying season, get easy financing on Fibe. Apply for a Personal Loan to get up to ₹5 lakhs within minutes. To get started, download our Instant Loan App or register on our website. 

FAQs on Old Regime Vs New Regime

Is the new tax regime better than the old?

This answer will vary based on your unique situation. Compare the old vs new tax regime based on your earnings and the deductions you can claim. Then, choose the regime that lowers your tax liability.

Which tax regime is better, old or new, for ₹15 lakhs?

If you have an annual income of ₹15 lakhs, compare the old vs new tax regime based on the deductions you claim. For example, if your deductions go above ₹3.58 lakhs, you may benefit from the old regime. If not, the new regime may be a better option.

Which tax regime is better for ₹22 lakhs?

With an income of ₹22 lakhs, you can computer your tax obligation as per the old regime vs the new regime based on the deductions that reduce your taxes. With a deduction of ₹4.25 lakhs, your liability in both regimes is the same. 

However, if you can get a higher amount as a deduction, the old regime can help you pay less tax. 

What are the benefits of the new tax regime?

The benefits under the new regime include:

  • The tax rebate limit has been extended to ₹7 lakhs
  • The tax exemption limit has been increased to ₹3 lakhs
  • You can also enjoy the standard deduction of ₹50,000
  • If your income is up to ₹7.5 lakhs, you don’t need to pay tax

What is the disadvantage of the new tax regime?

Here’s what you need to know:

  • There are fewer deductions when compared to the old regime
  • This regime doesn’t allow exemptions, unlike the earlier system

Which tax slab is better for a salaried person?

As an individual earning a monthly income, you can choose a preferred option that best suits your needs. The ideal slab you choose must be based on:

  • Exemptions you can claim
  • Deductions you can include 

Can I switch between the new and old tax regimes?

Yes, you can switch between new and old regimes annually. However, from 2023-24 onwards, the new regime is the default regime. To file returns under the old regime, you’ll have to:

  • Fill out specific forms
  • Inform your employer in advance

How can I avoid tax in the new tax regime?

This is all that you need to do:

  • Plan your investments
  • Evaluate the applicable exemptions and deductions in the new regime to increase your savings

Our top picks

Can Millennial Stress be Resolved by Financial Wellness?
Finance | 3 mins read
How Organisations Can Measure the Impact of Financial Wellness Programs
Finance | 3 mins read
How Can HR help Overcome Staffing Challenges in the Digital Age?
Corporate | 3 mins read
5 Signs of A Good HR Function
Corporate | 3 mins read