Old Income Tax Regime

Understand the intricacies about old income tax regime in India, the tax slabs, and more.
APPLY ONLINE
Old Income Tax Regime
APPLY ONLINE
2 min read
17 January 2024

India's taxation system has undergone numerous transformations, and one key facet that has played a significant role in shaping the financial landscape is the old tax regime. Read on to understand more about the old tax regime in India, delving into its structure, income tax slabs, and the distinct features that set it apart from the more recent new tax regime.

What is the old tax regime

The old tax regime, deeply entrenched in the Indian tax system, represents the traditional approach to income tax calculation. Governed by specific tax slabs and accompanied by various deductions and exemptions, it has been the go-to framework for taxpayers for an extended period.

Income tax slabs under the old regime

The income tax slabs under the old regime are primarily based on the taxpayer's age and income. As of the latest available information, the slabs for individuals below 60 years are structured as follows:

  1. Up to Rs. 2.5 lakh: No tax
  2. Rs. 2,50,001 to Rs. 5,00,000: 5% of the income exceeding Rs. 2.5 lakh
  3. Rs. 5,00,001 to Rs. 10,00,000: Rs. 12,500 + 20% of the income exceeding Rs. 5 lakh
  4. Above Rs. 10,00,000: Rs. 1,12,500 + 30% of the income exceeding Rs. 10 lakh

Features of the old tax regime

  1. Deductions and exemptions:
    One of the distinguishing features of the old tax regime is the availability of various deductions and exemptions. Taxpayers can reduce their taxable income through exemptions such as HRA (House Rent Allowance), standard deduction, and deductions under sections like 80C, 80D, and others.
  2. Investment opportunities:
    The old regime encourages taxpayers to invest in tax-saving instruments like Provident Fund (PF), Public Provident Fund (PPF), National Savings Certificate (NSC), and equity-linked savings schemes (ELSS) to avail deductions.
  3. Customised tax planning:
    The plethora of exemptions and deductions in the old tax regime allows for a more customised approach to tax planning. Individuals can strategically invest in specific instruments to optimise tax benefits.

New vs. old tax regime

The advent of the new tax regime has presented taxpayers with a choice between the old and new structures. While the new regime offers lower tax rates, it eliminates several deductions and exemptions available in the old regime. Taxpayers must carefully evaluate their financial goals, lifestyle, and overall tax liability before deciding which regime suits them best.

The old tax regime, with its well-established structure and comprehensive set of rules, has been a cornerstone of the country's tax system. Its unique blend of tax slabs, deductions, and exemptions has provided taxpayers with flexibility in managing their financial affairs. As the tax landscape continues to evolve, individuals must stay informed about these regimes to make informed decisions and optimise their tax liabilities.

Disclaimer

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Frequently asked questions

How is a taxpayer's income classified?

Income is broadly classified into five heads: Salary, house property, business or profession, capital gains, and other sources. Each head has specific rules for computing taxable income.

Is it essential for me to submit an Income Tax Return if my annual income is less than Rs. 2.5 lakh?

While filing an Income Tax Return is not mandatory for individuals with income below Rs. 2.5 lakh, it is advisable to do so for establishing financial credibility and various financial transactions.

Will my income as an agriculturist be taxed?

Agricultural income is generally exempt from income tax. However, any non-agricultural income or income from agricultural-related activities may be taxable.

Who is eligible for reimbursement under Section 87A?

Section 87A provides a rebate to individuals with a total income of up to Rs. 5 lakh. If you meet the eligibility criteria, you can claim a rebate of up to Rs. 12,500 or the amount of tax payable, whichever is lower.

Can I claim deductions under Section 80C and choose a new income tax slab regime?

No, the new tax regime does not allow for deductions under Section 80C and various other exemptions. If you opt for the new regime, you will enjoy lower tax rates but lose out on these deductions. It is crucial to assess the overall impact on your tax liability before making a decision.

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