India’s income tax system for FY 2024-25 offers two regimes—the New Tax Regime and the Old Tax Regime. Taxpayers can choose between the two based on their financial situation and available deductions. Here’s an example to demonstrate how tax is calculated for an income of ₹15,00,000 under both regimes.
The New Tax Regime features revised slabs and rates with limited deductions and exemptions. For FY 2024-25, the tax slabs under the New Regime are as follows:
Calculation Example
Gross Income: ₹15,00,000
Standard Deduction: ₹75,000
Taxable Income: ₹14,25,000
Tax Liability:
- ₹3,00,000 (Nil) = ₹0
- ₹4,00,000 (5%) = ₹20,000
- ₹3,00,000 (10%) = ₹30,000
- ₹2,00,000 (15%) = ₹30,000
- ₹2,25,000 (20%) = ₹45,000
Total Tax: ₹20,000 + ₹30,000 + ₹30,000 + ₹45,000 = ₹1,25,000
Tax Payable After Rebate (Under Section 87A): No rebate is applicable since the income exceeds ₹7,00,000.
The Old Tax Regime allows for several exemptions and deductions, including those under Section 80C (₹1,50,000), Section 80D, and HRA exemptions. The tax slabs under the Old Regime are as follows:
Calculation Example
Gross Income: ₹15,00,000
Deductions Claimed:
Section 80C (PPF, ELSS, etc.): ₹1,50,000
Section 80D (Medical Insurance): ₹25,000
Taxable Income: ₹15,00,000 – ₹1,50,000 – ₹25,000 = ₹13,25,000
Tax Liability:
- ₹2,50,000 (Nil) = ₹0
- ₹2,50,000 (5%) = ₹12,500
- ₹5,00,000 (20%) = ₹1,00,000
- ₹3,25,000 (30%) = ₹97,500
Total Tax: ₹12,500 + ₹1,00,000 + ₹97,500 = ₹2,10,000
Comparison of Tax Liability
Which tax Regime is better ?
New Tax Regime: Beneficial for those who have fewer deductions and exemptions.
Old Tax Regime: Ideal for individuals who can maximize exemptions and deductions.
Recommendation: Use the Income Tax Department’s official calculator to compare tax liabilities under both regimes before filing. Always consult with a tax advisor for personalized guidance.
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