There are currently two options for income taxpayers (Income Tax Regime). One option is the already existing old tax regime ie Old Tax Regime and the other option is the new tax regime ie New Tax Regime. In this budget, the government has made some changes in the new tax regime, so that it can be made more attractive. However, the presence of two options creates confusion in front of the taxpayers as to which option is better for them to choose. In such a situation, the government has introduced a tax calculator to help the taxpayers, which is available on the website of the Income Tax Department. With its help, you can choose a better option for yourself by comparing your savings under both tax regimes. It is available for the assessment year 2024-25 (AY 24-25).
First of all, let's assume that your gross salary after deducting the Exempt Allowance under both tax regimes is Rs 10 lakh per annum. You have also taken a home loan and paid Rs 2 lakh annually as interest. Apart from this, claim Rs 1.50 lakh as other deductions/exemptions like 80C and 80D.
After Standard Deduction, your income from salary has come down to Rs 9,50,000 in both tax regimes. In the Old Tax Regime, the money paid as home loan interest will be deducted from the income, so in the old system, your Gross Total Income will be Rs 7 lakh 50 thousand. Whereas in the new tax regime, it will remain at Rs 9,50,000 only, as home loan interest is not exempted in this option. After claiming the deduction of Rs 1.50 lakh, the total income in the old regime will be Rs 6 lakh, whereas, in the new tax regime, it will be Rs 9.5 lakh.
In the old tax regime, the total tax liability of Rs 6,00,000 will be Rs 33,800, whereas, in the new tax regime, your tax liability will be Rs 54,600. In this case, by choosing the old tax regime, you will save Rs 20,800.
Now let us assume that you live on rent in the city where you are working now. While you had earlier taken a house in some other city, which you bought by taking a home loan and your family members are still living there. In such a situation, you can claim HRA along with a home loan interest exemption. Suppose you get Rs 1 lakh 60 in a year as HRA from the company. In such a situation, after taking advantage of this, your tax liability will become zero in the old tax system. This means that in comparison to the new tax regime, there will be a saving of Rs 54,600 in the form of tax by opting for the old regime.