Income Tax New Regime: This is how your tax can be reduced in the new income tax regime

New income tax regime: The biggest advantage of the new regime is higher standard deduction. However, it must be kept in mind that standard deduction is available to employed people. If you are a professional, self-employed or businessman, then you will not get this benefit.

Salaried people have to tell their employer about their tax-saving plans. They also have to tell whether they want to use the new or old income tax regime in the new financial year. This has become very important because the relief for taxpayers in the new income tax regime, which was announced by Finance Minister Nirmala Sitharaman in the Union Budget presented on February 1 this year , has come into effect from April 1.

Major changes in the new regime will come into effect from April 1

The Finance Minister had said that if the annual income is up to Rs 12 lakh, then no tax will have to be paid. This relief was for the new regime of income tax. He also changed the tax slab of the new regime. Now in the new regime, 30 percent tax will have to be paid only by those taxpayers whose annual income is more than Rs 24 lakh. After the announcement made in this year’s budget, the attraction of the new regime of income tax has increased.

Three big benefits of the new regime

The biggest advantage of the new regime is higher standard deduction. However, it must be kept in mind that the benefit of standard deduction is available to employed people. If you are a professional, self-employed or businessman, then you will not get this benefit. The second advantage is that in this regime, no tax has to be paid on income up to Rs 12 lakh. The third advantage is its easy tax structure i.e. slabs. If a person’s basic salary is Rs 12.75 lakh, then he can make tax savings of Rs 1,87,200 in the new regime. We can understand this from the table given below.

There is no benefit of deduction in the new regime

The special thing about the old regime is that it offers the benefit of deduction. Taxpayers can claim deduction under Section 80C and Section 80D of Income Tax. Deduction can be claimed on home loan interest under Section 24B. House Rent Allowance (HRA) can be claimed. If a taxpayer claims a deduction of up to Rs 8 lakh by combining all types of deductions, then only the old regime can be beneficial for him.

Deduction is available in these sections

In the old regime, deduction can be claimed by making tax-saving investments of up to Rs 1.5 lakh annually under Section 80C. Deduction is available on health policies under Section 80D. A person below 60 years of age can buy a health policy for himself and his family and claim a deduction of Rs 25,000 annually on its premium. If the person is 60 years of age or older, he can claim a deduction of Rs 50,000 on the premium. He can also buy a health policy for his elderly parents and claim a deduction of Rs 50,000 annually.

New and old income tax regime