Old Tax Regime vs New Tax Regime: If you earn Rs 80 thousand monthly, then which tax regime should you choose, New or Old, in which you will save more tax? Here is the complete calculation for you.
Income Tax Regime: Often people are confused about choosing the tax regime, which is better, the new tax regime or the old tax regime? Especially since the Central Government has made the new tax regime the default tax system. The government introduced a new tax regime as an alternative to the old tax regime, known as Section 115BAC.
This new tax regime was optional and started from April 1, 2020 for individuals and Hindu Undivided Families (HUF). 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 system for taxpayers who are not filing any income tax at the beginning of the new financial year. Do not select preferences.
How many times can you switch 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 opted out of the new tax regime, can come back to the new tax regime only once.
Benefits of old tax regime
The old tax regime charges a higher tax rate than the new tax regime, but provides 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 especially tax saving. The old tax regime encourages people to invest in tax saving schemes. With this, along with the habit of investing, good funds are also accumulated in the long term.
Benefits of new tax regime
On the other hand, the new tax regime offers lower tax rates, but most of the exemptions and deductions are not available. In this, deduction is not available under NPS except in special cases like company contribution and extra employee cost.
Which tax regime is better on monthly income of Rs 80 thousand?
Therefore, which tax regime should you choose, you should decide after considering your financial income, tax exemption, investment 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 may be better for you? To remove confusion, it has been explained through calculations. Let us know…
How much tax will have to be paid on salary of Rs 80,000?
| Total income | Old tax regime | New tax regime |
| 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 income | Rs 7,60,000 | Rs 9,10,000 |
| tax liability | Rs 67,080 | Rs 48,360 |
Note- Here deduction on investment is eligible u/s 80C.
Which tax regime to choose on monthly salary of Rs 80 thousand
If we look at the calculations explained above, the annual tax to be paid in the old tax regime 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, on a monthly salary of Rs 80 thousand, the total annual tax liability will be Rs 48,360, which includes Rs 46,500 basic tax 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 regime because they will save more tax in it. This calculation has been done by Dr. Suresh Surana, Founder of RSM India.
