Old Income Tax Regime Vs New: How are both different?

Budget 2023: Personal Income tax is an important part of the budget. In 2020, the government proposed a new tax regime for taxpayers. The new income tax regime is optional.

In the new tax regime, the government added more tax slabs and lower tax rates. This was long demanded by most taxpayers, but it came with the catch of removal of all the deductions and exemptions that were available under the old tax regime.

New Tax Regime

In the new regime, there are more tax slabs, accompanied by lowering of rates in the Rs 15 lakh range. Additionally, all the exemptions and deductions that were being used by taxpayers in the old regime are not available in the new regime.

Old Tax Regime

In the old tax regime, there are many ways to reduce tax liability. Exemptions like House Rent Allowance (HRA) and Leave Travel Allowance (LTA), deductions allow taxpayers to lower their tax amount by investing, saving or spending on specific items.

The biggest section for deduction is Section 80C through which taxpayers can bring down their taxable income by Rs 1.5 lakh.  Apart from this, there are several other sections that let you take tax deductions on things ranging from interest on your loans (home and education) to premiums you pay for health insurance.

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Here is a comparison between the old and new tax slabs

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