Old Regime vs New Regime of Indian Taxation

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1.1 What is the Indian Taxation System


The below diagram illustrates the Taxation system in India which is divided into two parts, Direct taxes, and Indirect taxes. Right now we will only focus on the "Income tax" for going ahead in this blog post.

I.2 Indian Tax System post-GST

The government imposes a tax on taxable income of all persons who are individuals, Hindu Undivided Families (HUF's), companies, firms, LLP, an association of persons, a body of individuals, local authority, and any other artificial juridical person.
Isn't it complex ..?

Let me tell you this way :
Everyone who earns any kind of income is liable to pay income tax. However, agricultural Income is tax-free.

Voila...Sounds easy now ..!

1.2 Old Regime of Taxation

Old Regime is the rules for paying the income tax before the budget 2020 was announced.
This is nothing but with what percentage of tax which one has to pay.
The Old regime tax buckets are as follow:
For taxable income between 0 to 2,50,000: Nil
For taxable income between 2,50,000 to 5,00,000: 5%
For taxable income between 5,00,000 to 10,00,000: 20%
For taxable income above 10,00,000: 30%

1.2 New tax Regime
Budget 2020 introduced a new income tax regime for individual taxpayers. i.e., New tax buckets while paying taxes. This regime is optional. The taxpayer can choose either of the Regime while filing taxes. In this new regime, the tax brackets are increased compared with the old.

Old & New Tax Regime are nothing but the tax rules wherein one should pay the tax according to tax brackets as specified as below :
I.3 Tax Brackets

1.3 How to select one?


Your company will give you the option to opt for the regime that you like or which you think is the best fit for you. Employers have started rolling out investment declaration forms and are asking employees to indicate their choice of tax regime: obviously for deducting TDS basis on your selection.

To know more about TDS, Read my First Blog if you haven't read earlier: Why to Save TDS 

1.4 Which is Beneficial for you?


you need to calculate the tax payable with old and new regime depending upon the tax bracket you fall into. Obviously, the method which saves your money you should choose that regime
I.3 Calculating tax for an income of 750000.

Consider the above example of Mr.Tough having a yearly income of 7 Lakh 50 thousand.
Mr.Tough also has a deduction of 2 Lakh ( 1.5 Lakh in 80 C and 50 K in Std. Deduction) which he can claim during ITR.
Column C Gives you tax payable with the old Regime and Column F gives you tax payable with New regime.
So, with the old regime, Mr.Tough can save 15,600 rupees... that's a very good amount...

[Think where Mr.Tough can invest this 15,600 & Comment; if you cant figure out now just keep reading my upcoming blogs, you will get an idea.]

Hence, in the above case, it is advisable to choose the Old Regime of Taxation.
Just using simple math you can calculate your tax liability.


1.5 Things to keep in mind

  • This New Regime is for Simplifying the tax Structure for the one who finds it difficult and needs consulting while filing ITR
  • A taxpayer having no business income can select the Old Regime or New Regime every year upon analyzing what is more beneficial
  • If you have business income, you can only opt for this regime once and then every year you will have to continue with the same tax regime
  • The new tax regime has multiple tax slabs with lower tax % rates than the current regime but most deductions are not available
  • More importantly, if you choose New Regime you just can't claim your deductions under the Income-tax sections

1.6 Tax Calculator


Please visit these government websites for calculating your tax & comparing tax payable as per Old Vs New Regime : 

Advance tax calculator : 


Check out my next blog on: "Various Ways To Save Tax"

Have you checked FinAjinkya's first video on Youtube?



With your valuable comments,
Please let me know what else I can do to help you better with the information in the upcoming blogs:

You can write your queries in the comments section related to this blog if any.

if you have chosen New Regime, please comment reasons for the same?

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