How to Calculate Tax in New Regime
The new tax regime in India was introduced under the Union Budget 2020, offering an alternative tax structure with different slabs and lower tax rates. Unlike the old regime, this new system removes several exemptions and deductions. Here’s how you can calculate tax under the new regime.
Step 1: Determine Your Total Income
Add all sources of income including salary, business profits, rental income, and capital gains.
Step 2: Identify the Applicable Tax Slab
The new tax slabs are as follows:
- Income up to ₹2,50,000 – No tax
- ₹2,50,001 – ₹5,00,000 – 5%
- ₹5,00,001 – ₹7,50,000 – 10%
- ₹7,50,001 – ₹10,00,000 – 15%
- ₹10,00,001 – ₹12,50,000 – 20%
- ₹12,50,001 – ₹15,00,000 – 25%
- Above ₹15,00,000 – 30%
Step 3: Apply the Tax Rate
Based on your total taxable income, apply the corresponding tax rate.
Step 4: Deduct Rebate & Cess
If your income is below ₹5,00,000, you can claim a rebate under Section 87A. Also, add a 4% health and education cess.
Frequently Asked Questions (FAQs)
1. Is the new tax regime better than the old one?
It depends on your income and deductions. If you claim fewer deductions, the new regime might be beneficial.
2. Can I switch back to the old regime?
Yes, salaried employees can choose between old and new regimes every year.
3. Are standard deductions allowed?
No, the new regime does not allow the standard ₹50,000 deduction.
4. Can I claim HRA under the new tax regime?
No, House Rent Allowance (HRA) exemptions are not allowed.
5. Is it mandatory to opt for the new tax regime?
No, taxpayers can choose between the old and new regimes.
6. What is the maximum tax rate in the new regime?
The highest tax rate is 30% for income above ₹15,00,000.
7. How do I calculate tax manually?
Apply the tax slabs to your income and calculate accordingly.
8. What if I have investments in PPF?
Investments like PPF and ELSS are not deductible under the new regime.
9. Can businesses opt for the new regime?
Yes, businesses can opt for the new regime under certain conditions.
10. Is 80C applicable?
No, deductions under 80C are not available in the new tax regime.
11. Can pensioners benefit from the new regime?
Pensioners can opt for the new regime, but deductions are not allowed.
12. How does the new tax regime affect senior citizens?
Senior citizens can opt for the new regime but without special exemptions.
13. Is agricultural income taxable?
Agricultural income remains tax-exempt.
14. What is the deadline to switch regimes?
The choice is made while filing the annual tax return.
15. Can I claim a home loan interest deduction?
No, home loan interest deductions are not available in the new regime.