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Income tax system: Often people are confused about choosing the tax system, which is better, the new tax system or the old tax system? Especially since the Central Government has made the new tax system the default tax system. The government introduced a new tax regime known as Section 115BAC as an alternative to the old tax regime.
This new tax regime was optional and started from April 1, 2020 for individuals and Hindu Undivided Families (HUFs). After three years of operation, Union Finance Minister Nirmala Sitharaman announced during the Union Budget 2023 that going forward, this new tax regime will become the default tax regime for taxpayers who are not filing any income tax at the beginning of the new financial year. Are. Do not select preferences.
How many times can you change tax regime?
The Finance Act 2023 has made the new tax regime the default tax regime for the financial year 2023-24 (AY 2024-25). A taxpayer can switch between the old and new tax regime on an annual basis. However, any taxpayer earning income from business or profession, who has once exited the new tax regime, can come back to the new tax regime only once.
Benefits of old tax system
The old tax system carries a higher tax rate than the new tax system, but offers many benefits. It offers various exemptions and deductions to taxpayers, including House Rent Allowance (HRA), Leave Travel Allowance (LTA), Section 80C investment based tax exemption and Section 80D health insurance premium exemption, which are particularly tax saving. The old tax system encourages people to invest in tax saving schemes. This leads to the habit of investing as well as accumulation of good funds in the long run.
Benefits of the new tax regime
On the other hand, the new tax regime offers lower tax rates, but most exemptions and deductions are not available. There are no deductions available under NPS except in special cases like company contributions and additional employee costs.
Which tax regime is better on a monthly income of Rs 80 thousand?
Therefore, which tax regime you should choose, you should decide after considering your financial income, tax exemptions, investments in schemes and other benefits. According to the report of Business Today, if your monthly income is Rs 80 thousand then how much tax will you have to pay? Which tax system might be better for you? To remove confusion, it is explained through calculations. let us know…
How much tax will have to be paid on a salary of Rs 80,000?
| Total Earnings | old tax system | new tax system |
| 80,000*12 | Rs 9,60,000 | Rs 9,60,000 |
| standard deduction | (Rs 50,000) | (Rs 50,000) |
| gross total income | Rs 9,10,000 | Rs 9,10,000 |
| Chapter VI-A Deduction | (Rs 1,50,000) | , |
| Total Earnings | Rs 7,60,000 | Rs 9,10,000 |
| financial liability | Rs 67,080 | Rs 48,360 |
Note- Here the investment is deductible under section 80C.
Which tax regime to choose on a monthly salary of Rs 80 thousand?
If we look at the calculation mentioned above, in the old tax system, the annual tax to be paid is Rs 67,080, in which basic tax is Rs 64,500 and cess is 4% i.e. Rs 2,580. Similarly, in the new tax regime, the total annual tax liability on a monthly salary of Rs 80,000 will be Rs 48,360, which includes basic tax of Rs 46,500 and 4 percent cess or Rs 1,860.
On the basis of this calculation, it can be said that people earning Rs 80,000 per month can choose the new tax system because they will save more tax in it. This calculation has been done by Dr. Suresh Surana, founder of RSM India.
