Old vs New Tax Regime: How Salaried Taxpayers Should Decide

Every salaried taxpayer now chooses between two ways of computing tax. The new regime offers lower slab rates but allows very few deductions. The old regime has higher rates but lets you reduce taxable income through investments and expenses. Neither is better for everyone.

What you give up in the new regime. Most of the familiar deductions — investments in PPF, ELSS and life insurance, health insurance premiums, house rent allowance, and interest on a home loan for a self-occupied house — do not reduce your taxable income under the new regime.

When the old regime still wins. If you pay rent in a city, repay a home loan, invest regularly for tax saving and pay health insurance premiums for your family, your deductions can be large enough that the old regime works out cheaper despite its higher rates.

When the new regime wins. If you have few deductions — a young professional with no home loan and little tax-saving investment, for example — the lower rates usually leave more money in your hand, with simpler paperwork.

The only reliable way to decide is to compute both. Slabs, rebates and the standard deduction are revised from time to time, so last year’s answer is not necessarily this year’s. Work out your tax under each regime with your actual income and deductions, and pick the lower figure.

Tell your employer early. Your employer deducts TDS based on the regime you declare at the start of the year. You can generally still choose at the time of filing, but declaring correctly upfront keeps your monthly TDS in line with your final tax.

At Gatiman Global Finance Corp we compare both regimes for every salaried return we file in Surat, claim every deduction you are entitled to, and follow up your refund. Send us your Form 16 on WhatsApp to get started.