Explainer | Income Tax: New vs old regime

• Follow

A financially sound individual must assess his/her income and its relationship with the income tax. The basic exemption limit of income tax is for an income of 2.5 lakh, which means no tax is cut if you are earning up to Rs 2.5 lakh. It is important to know the tax deducted on various income slabs as per the new regime.

But return may have to be filed even if you fall in the category of ‘0 – Rs 2.5 lakh’, under three conditions-

– If the person has paid an electricity bill of up to Rs 1 lakh.

– He/she has sponsored a foreign trip for himself/herself or for someone else up to Rs 2 lakh

– The current bank account has Rs 1 crore or more money deposited

Which slab of income tax is levied and when is it mandatory to file returns? This explainer on income tax will help you understand the complete method of tax calculation.

If the annual income is Rs 5 lakh then one can claim a tax rebate of Rs 12,500 under section 87-A. Even if the tax is zero, it is necessary to file the return to get the exemption.

The first two income tax slabs for both new and old regimes are the same.

Tax slabs in old regime

0- Rs 2.5 lakh- Nil

Rs 2.5 lakh- Rs 5 lakh- 5%

Rs 5- Rs 10 lakh- 20 %

Rs 10 lakh and more- 30%

New Regime

0- Rs 2.5 lakh- Nil

Rs 2.5 lakh- Rs 5 lakh- 5%

Rs 5- Rs 7.5 lakh- 10%

Rs 7.5 lakh- Rs 10 lakh- 15%

Rs 10- Rs 12.5 lakh- 20%

Rs 12.5 lakh- Rs 15 lakh- 25%

Rs 15 lakh and more- 30%