Annual income above Rs 10 lakh? Find out which income tax regime suits you better

• February 7, 2023
• CA Chandan Agarwal's Office

It has become clear that any person earning Rs 7.5 lakh annually or lower will benefit from the new income tax regime. But what if you earn more than Rs 10 lakh or more? Here is all you need to know.

The Union Budget 2023 came up with a big boost for taxpayers. Major changes have been announced under the new tax regime, and as per my observation, the government is more likely to promote the new tax regime.

The following proposals have been made for the new tax regime to reduce the burden on taxpayers:

• Rebate under Section 87A can be claimed by people with annual income up to Rs 7 lakh
• No tax for income up to Rs 3 lakh
• Highest surcharge rate reduced from 37 per cent to 25 per cent
• Standard deduction of Rs 50,000 introduced for the salaried and pensioners
• Family pension exemption of Rs 15,000 was introduced

The tax slabs have been reduced from 6 to 5. The new structure is as follows:

1) Rs 0 to Rs 3 lakh – Nil

2) Rs 3 to 6 lakh – 5%

3) Rs 6 to 9 lakh – 10%

4) Rs 9 lakh to Rs 12 lakh – 15%

5) Rs 12 lakh to Rs 15 lakh – 20%

6) Above Rs 15 lakh – 30%

However, the introduction of these benefits seems to have confused taxpayers even more about which tax regime to opt for. The answer to this question is an analysis of the benefits provided under both regimes. This decision solely depends on case-to-case bases, depending upon the choices made by the taxpayer.

Scenario 1: What if your annual income is Rs 7.5 lakh or lower?

For example, suppose your annual income is up to Rs 7.5 lakh, and you are a resident individual. In that case, the new tax regime is a stress-free option as no tax is required to be paid up to Rs 7 lakh per annum as rebate under section 87 A is available. Remember, you can now claim a standard deduction of Rs 50,000 under the new tax regime. This means any income up to Rs 7.5 lakh is exempt from taxation.

In the case of the old tax regime, you do not have to pay any tax for an income up to Rs 7.5 lakh, but for that you have to claim deductions of Rs 2.5 lakh. This will include the standard deduction of Rs 50,000, and additional deductions worth Rs 2 lakh towards Chapter VI A deductions like Section 80C and more.

Scenario 2: What if your annual salary is Rs 10 lakh or more?

Let us understand the tax calculation under the old and new tax regime post-budget 2023-24 via the following example:-

Example 1: Mr. A’s net salary after standard deduction is Rs. 10 lakh. He has also invested in PPF amounting to Rs. 1,50,000. Along with this, he has also paid interest on an education loan of Rs 1.5 lakh and Rs 50,000 under the NPS contribution.

Source: https://www.indiatoday.in/business/story/income-tax-old-vs-new-regime-what-to-do-if-earning-above-rs-10-lakh-2331024-2023-02-06