Investor Corner/Money matters beyond investing/Personal Finance Adjacent
4.4.3 New Tax Regime vs Old Tax Regime
The new tax regime offers lower slab rates but removes most deductions and exemptions. The old regime keeps those deductions available at higher slab rates. Which one actually costs less depends entirely on how many deductions you genuinely use.
The basic trade-off between the two regimes
The new tax regime applies generally lower tax rates across income slabs, but does away with most common deductions, including many 80C investments, HRA and certain other exemptions available under the old regime. The old regime keeps these deductions available, but taxes income at comparatively higher slab rates in exchange.
Why the right choice is genuinely personal
Someone with substantial 80C investments, a home loan, and HRA claims may find the old regime results in lower overall tax despite its higher headline rates, because the deductions reduce taxable income enough to offset the rate difference. Someone with few deductions to claim may find the new regime's lower rates result in less tax paid overall, even without any deductions applied.
Why this needs an actual calculation, not a general rule
There is no single answer that applies to everyone, since the right choice depends on the specific combination of income level and deductions actually available to that individual. Running both scenarios with your own real numbers, ideally every year given that both income and available deductions can change, is the only reliable way to know which regime is actually cheaper for your specific situation, and current rules should always be checked given how frequently this area of policy has changed.
How PriLytics helps. PriLytics tracks realised gains by financial year across your investments, giving you accurate figures to plug into whichever tax regime calculation you are running. See capital gains and tax.