New tax regime vs old tax regime: What is point at which tax outgo is the same in both regimes? Check salary and deduction levels

New Income Tax Regime Vs Old Income Tax Regime 2024-25: Selecting the most tax-efficient income tax regime, either the old or new, can be a challenging decision for many salaried taxpayers. April is the first month of the new financial year, and employers would have asked salaried individuals to share their choice of preferred income tax regime for the purpose of TDS.
One must remember that the new income tax regime is now the default tax regime and in case you don’t tell your employer your chosen tax regime, your TDS will be deducted as per the new tax regime. If at the time of filing your tax return you want to switch regimes, you can, provided the ITR is filed within the due date provided by the Income Tax Department.

What income tax regime will work for you? Do you want to understand the old and the new income tax regime better? Then register and join TOI Masterclass on New Tax Regime vs Old Tax Regime on April 26, 2024 at 3:00 PM. Click here to register

New Vs Old Tax Regime: Understanding the break-even
The optimal choice between the new income tax regime and the old income tax regime depends on the amount of deductions that can be claimed from gross total income to reduce taxable income. If taxpayers are aware of their gross total income and the minimum deductions required to pay the same tax under both regimes, the decision becomes more straightforward.
When the claimable deductions exceed this minimum amount, the old tax regime proves more beneficial, while the new tax regime saves more tax if the deductions fall below this threshold, explains an ET analysis.
It is crucial to note that the minimum deductions necessary to equalize the tax outgo in both regimes vary based on the income level. The table provided below as part of an ET analysis illustrates the minimum deduction amounts that individuals at different gross taxable income levels must claim to achieve equal income tax payable, also known as their break-even level of deductions.

Minimum deductions / break-even levels needed under old tax regime
Gross IncomeMin DeductionsEqual Tax Outgo in both regimes
Rs 8 lakhRs 2,12,500Rs 31,200
Rs 9 lakhRs 2,62,500Rs 41,600
Rs 10 lakhRs 3,00,000Rs 54,600
Rs 12 lakhRs 3,50,000Rs 85,800
Rs 12.5 lakhRs 3,62,500Rs 93,600
Rs 13 lakhRs 3,62,500Rs 1,04,000
Rs 13.5 lakhRs 3,62,500Rs 1,14,400
Rs 14 lakhRs 3,75,000Rs 1,24,800
Rs 14.5 lakhRs 3, 91,664Rs 1,35,200
Rs 15 lakhRs 4,08,335Rs 1,45,600
Rs 15.5 lakhRs 4,25,000Rs 1,56,000
Rs 16 lakhRs 4,25,000Rs 1,71,600
Rs 16.5 lakhRs 4,25,000Rs 1,87,200
Rs 20 lakhRs 4,25,000Rs 2,96,400

Cess at 4% is included in final tax liability.

From the table above, it can be seen that once the income crosses the threshold of Rs 15.5 lakh, the maximum deduction of Rs 4.25 lakh remains constant. This is because the income tax rate of 30% remains constant after income crosses Rs 15 lakh in the new tax regime. Under the old tax regime, the income tax rate of 30% becomes constant once income exceeds Rs 10 lakh. Do remember that surcharges are levied when taxable income exceeds Rs 50 lakh. Hence, for those incomes, the minimum deduction amount will vary.
Also Read | New Vs Old Tax Regime: How income of even Rs 10 lakh can be tax-free under old tax regime
The table is specifically designed for salaried individuals who can benefit from a standard deduction of Rs 50,000 from salary income in both tax regimes. The deduction available on the employer’s contribution to NPS has not been considered when determining the break-even or minimum deduction amount. If a salaried individual claims this deduction in both regimes, the break-even or minimum deduction amount will be lower.

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