Presenting before you the Income Tax Calculator tool which is going to help individuals to do tax planning well in advance and to see which tax regime suits them better and saves the taxes more.
Budget 2023: The Shift of Focus to New Tax Regime
Each year budget brings new hope to the people of India. It was nothing different this year as well. Soon after budget announcement the internet went crazy over the tax rate cuts, but hardly many knew that this was only applicable to the New Tax Regime.
Those who aren’t aware, there are two categorization of taxes by the Govt. of India after 2020. They are Old Tax Regime and New Tax Regime. Each one has their own perks and benefits and suitable for different types of people.
For someone who is more into investments and future savings or has different types of loans running, the old tax regime fits in the slot. But for those who do not want to claim any deductions on investments be it in Provident funds or Tax Saver Funds, the New Tax Regime is suitable for them. Check the below income tax calculator to find out your final taxes in both these regimes.
How to use the Income Tax Calculator?
Step1: Fill in your financial details which includes the Financial Year you are looking for to file the taxes, your age bracket and your class of income.
Step2: Once done, then fill in your income details which are categorized into salaried, pension and other sources of income.
Step3: If you have investments made make sure to fill those details in the Deductions section(we have included the max capping on the limits, so even if you enter more than the threshold, it is only going to pick what is allowed at the maximum extent for eligible deduction).
Step4: Once done with all these basic steps, you will see your calculated net taxes which includes an additional 4% of cess charges added in. If your income in more than 50L/1Cr, surcharges are also applicable on the total tax amount.
Why don’t you try out yourself?
Note: This calculator is updated with the latest budget’s implications on the New tax regime.
Let’s take an example to understand how the income tax is calculated for the two regimes with the latest implicated changes for FY 2023-24.
Suppose you have your salaried income of Rs. 10 Lakhs, according to old tax regime here is how your final taxation amount would look like;
0-2.5L – 0% taxes
2.5-5L – 5% taxes (5% of 2.5L = Rs. 12,500)
5L-10L – 20% taxes (20% of 4.5L = Rs. 90,000) By Default a 50,000 of Standard deduction applies in the Old Tax regime.
So, total taxes under Old Tax Regime would incur Rs. 1,02,500. On top of this final taxed amount a 4% of additional cess applies, which makes it Rs. 1,06,600 in total.
Now, coming to the New Tax Regime, here is what you need to pay on your 10L gross income.
0-3L – 0% taxes
3L-6L – 5% taxes (5% of 3L = Rs. 15,000)
6L-9L – 10% taxes (10% of 3L= Rs. 30,000)
9L-10L – 15% taxes (15% of 0.5 Lakh = Rs. 7,500) (Standard Deduction of Rs 50,000 has been introduced into New Tax Regime as well)
So, total taxes under New Tax Regime would incur Rs. 52,500. On top of this final taxed amount a 4% of additional cess applies, which makes it Rs. 54,600 in total.
For all incomes above 15.5 L the new value for Standard deduction would be Rs. 52,500. For rest it remains Rs. 50,000.
You can clearly see there is a daylight difference between the two final taxed amounts for both of these regimes. But, this would change if someone is claiming deductions for their loans, investments and insurances. This perk makes the Old Tax Regime better for those who are constantly into savings and future planning.
For those who want to enjoy the things at present without bothering much about the future savings in form of insurances or investments or are willing to take these for security but do not wish to claim deductions are welcomed to go for the New Tax Regime. Our new income tax calculator tool is always there to help you decide.
Understanding some common Deductions Available to Claim under Old Tax Regime
Deduction under 80C
Section 80C allows the tax payers to straight away cut short their taxable income down by 1.5L if they are invested into Provident funds, insurances(Life/Term), Tax saver funds(ULIPs, ELSS).
Deduction under 80D
All medical insurances can be claimed and exempted from taxes under section 80D, where senior citizens can avail up to 50,000 of deductions and non-senior citizens can claim upto 25,000.
Deduction under 80CCD
This is a smarter way to build your corpus for retirement fund and also claim deduction of max 50,000 from your total income. By investing into National Pension Scheme(NPS) each year you save this amount.
Deduction under HRA
Under Section 10(13A) can be claimed if you are living in a rented house, this amount is 50% of your basic salary for metro cities and 40% for non-metro cities. This can be entirely claimed as per your salary.
Final Verdict
Seeing all of these, I leave it up to you to finally take a call with the above Income tax calculator available to do all that you need to compare your taxes under both these regimes. Be wise and choose the best for yourself!
For more detailed look into the Budget click here
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