Introduction

Budget 2023 further strengthened the new tax regime, offering simplified slabs and concessional rates. With both regimes now available, taxpayers—especially salaried individuals—often struggle to decide which option is financially beneficial.

The choice between the old regime (with deductions and exemptions) and the new regime (with lower tax rates but limited deductions) depends on income type, investments, and personal tax planning goals.

This guide explains key differences, slab rates, deductions allowed, practical examples, and how to choose the right regime for FY 2023–24.

Understanding the Old Tax Regime

Under the old regime, taxpayers enjoy numerous deductions and exemptions, reducing taxable income.

✔ Major Deductions Allowed:

• Section 80C (PPF, ELSS, PF, LIC, etc.) – up to ₹1.5 lakh

• Section 80D – Health insurance premium

• Section 24(b) – Home loan interest

• HRA exemption

• LTA (Leave Travel Allowance)

• Donations (80G), Education loan interest (80E), etc.

✔ Ideal for:

• Taxpayers who maximise investments

• Individuals claiming home loan benefits

• Salaried employees receiving HRA/LTA

Understanding the New Tax Regime (115BAC)

The new tax regime offers lower tax rates and a cleaner structure without major deductions.

✔ Benefits:

• Simplified tax calculation

• Lower slab rates (especially for incomes below ₹15 lakh)

• No need to track investments or exemptions

• Default regime from FY 2023–24 onwards

✔ Deductions Not Allowed:

Most exemptions like HRA, 80C, 80D, LTA, and standard exemptions are not permitted.

Tax Slab Comparison (Budget 2023)

Old vs New Regime – What You Gain and Lose

Which Regime Is Better For You? (Practical Scenarios)

Scenario 1 – Employee with High Deductions

• 80C: ₹1.5 lakh

• 80D + other deductions: ₹50,000

• HRA exemption: ₹1.2 lakh

Old Regime is beneficial due to higher tax savings

Scenario 2 – Employee Without Major Investments

• No home loan

• No insurance investments

• Mostly salary income

New Regime is beneficial due to lower slab rates.

Scenario 3 – Self-Employed Professional

• Flexible income

• May not invest in tax-saving instruments

New Regime simplifies compliance and reduces tax liability.

How to Choose the Right Regime

Ask yourself:

✔ Do you claim more than ₹3 lakh in deductions & exemptions?

→ Old Regime

✔ Do you prefer simplicity and lower rates?

→ New Regime

✔ Are you salaried without major tax-saving investments?

→ New Regime

✔ Do you have an active home loan with high interest deductions?

→ Old Regime

Conclusion

Both tax regimes have their own advantages. The right choice depends on your income structure, investments, deductions, and long-term financial planning. Salaried taxpayers can switch regimes every year, but those with business income must plan more carefully.

Bisways Consulting Group helps individuals evaluate both regimes, compute tax liability, and choose the most beneficial option for optimal savings.