A tax schedule essentially determines the amount of tax a person or business needs to pay based on their income. In the Union Budget 2023-24, Finance Minister Nirmala Sitharaman implemented the revised tax structure, which includes revised taxes.

The main highlights of the new system include raising the basic tax exemption threshold and increasing tax refunds. Taxpayers can choose between the previous tax regime and the updated tax regime.

These modifications are for the new tax regime and the old tax regime remains unchanged. Although the new tax regime will become the default option from 2023-24, taxpayers will still have the flexibility to choose the old tax regime if they wish.

Choosing between the old and new tax regimes can be tricky, especially given the differences in tax regimes. Let’s break down the key points to help you understand:

old tax system

Board structure:

• 5%: From Rs 2.5 Lakh to Rs 5 Lakh
• 20%: Rs 5 Lakh to Rs 10 Lakh
• 30%: Above Rs 10 Lakhs

• In the old tax system, there were seven tax brackets, with liabilities ranging from zero to 30% of income.
• People earning less than Rs 2.5 lakh per annum are exempt from income tax.
• People earning between Rs 2.5 and 5 lakh have to comply with a tax rate of 5%.
• For those with an annual income between Rs 5 lakh and Rs 7.5 lakh, the income tax rate is 10% of the total income.
• The annual income of an individual in this category ranges from Rs 7.5 to Rs 10 lakh. Their tax rate is 15%.
• For income of Rs 10 to Rs 12.50 lakh per annum, the tax rate is 20%.
• People earning between Rs 1.25 and Rs 15 lakh will have to comply with a tax rate of 25%.
• The tax rate is 30% for annual income exceeding Rs 15 lakh.

Under the new income tax regime, the number of slabs has been reduced.

Board structure:

• 0%: No tax on income up to Rs 3 lakh
• 5%: From Rs 3 Lakhs to Rs 6 Lakhs
• 10%: From Rs 6 Lakhs to Rs 9 Lakhs
• 15%: From Rs 9 Lakhs to Rs 12 Lakhs
• 20%: From Rs 12 Lakhs to Rs 15 Lakhs
• 30%: Above Rs 1.5 million

Additional fee: Applies to certain income brackets:

• 10%: Above Rs 50 Lakhs
• 15%: Above Rs 1 Crore
• 25%: Over Rs 2 Crore (reduced from 37% in 2023)

• People earning less than 3 lakh rupees a month are not required to pay income tax.
• The tax rate for annual income between Rs 3 and Rs 6 lakh is 5%.
• However, tax rebate is available for income up to Rs 7 lakh and hence tax-free.
• Those earning between Rs 6 lakh and Rs 9 lakh annually will have to comply with a 10% tax rate.
• The tax rate is set at 15% for annual income of Rs 9 lakh to Rs 12 lakh.
• For the next tax bracket (covering annual income of Rs 12 lakh to Rs 15 lakh), the tax rate is 20%.
• The last tax bill covers everyone with an annual income of more than Rs 15 lakh. Their tax liability is 30%.

New tax system vs. old tax system: Which tax system is better?

The best system for you depends on your income, investments and deductions. If you have a simple income structure with limited deductions, the new system may be more advantageous. However, if you have large investments or claim many deductions, the old system may save you more tax.

It is recommended to consult a tax advisor to determine the best regime for your circumstances.

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