If you earn ₹15 lakh, you save ₹15,600 with the new tax regime but you can’t claim tax benefits worth ₹73,000

If you earn ₹15 lakh, you save ₹15,600 with the new tax regime but you can’t claim tax benefits worth ₹73,000
Individuals earning more than Rs.15 lakh have a lot to gain from the new tax regime, especially with tax deductions being rolled backNeedpix

  • The new tax regime could mean savings of up to ₹15,600 for people earning more than ₹13 lakh per month.
  • A person earning ₹15 lakh will be losing out on at least ₹73,000 in tax benefits as the government removes tax exemptions.
  • The new tax slabs with lower tax rates will leave more money on the table to invest, save or spend — as per the taxpayer’s preference.
The government’s new tax regime isn’t for everyone. If you earn less than ₹13 lakh per annum, it might make more sense for you to stick to the old tax slabs. However, if you earn more than that — moving to the new tax rates might end up saving you money.

According to the government, 5.3 crore out of 5.78 taxpayers claim deductions that are less than ₹2 lakh — including provident funds, insurance and other tax-saving instruments.

So, anyone claiming ₹1.5 lakh under 80(C) and the ₹50,000 standard deductions, could stand to gain up to ₹15,600 under the new regime.

IncomeOld regime (without deductions)Old regime (with deductions)New regimeSavings
Up to ₹13 lakh₹ 2.11 lakh₹1.48 lakh₹1.43 lakh₹5,200
Up to ₹14 lakh ₹ 2.42 lakh₹1.79 lakh₹ 1.69 lakh₹10,400
Up to ₹15 lakh ₹ 2.73 lakh₹ 2.11 lakh₹ 1.95 lakh₹15,600
Assuming ₹1.5 lakh tax exemption under 80(C) and ₹50,000 standard deduction.

But there’s a catch
If you’re a person with a salary of ₹15 lakh per annum, it makes even more sense to switch over the new tax regime because some of the most common tax exemptions no longer apply.

Under the new income tax slabs:
Exemptions that no longer applyExemptions you can still avail
Section 80C investmentsStandard deduction on rent
House rent allowanceAgricultural income
Housing loan interestIncome from life insurance
Leave travel allowanceRetrenchment compensation
Medical insurance premiumVRS proceeds
Standard deductionLeave encashment on retirement
Saving bank interest
Education loan interest

So if you earn ₹15 lakh annually, you stand to lose the following tax saving options:

Exemptions that no longer applyDeduction amount
Section 80C investments₹1.5 lakh
NPS deduction₹50,000
Medical insurance premium₹25,000
Standard deduction₹50,000
Saving bank interest₹10,000
Housing loan interest₹2 lakh
TOTAL₹ 4.85 lakh

So, even though you technically save ₹15,600 by switching to the new tax regime, you’re also losing ₹73,000 because the government’s taken away tax exemptions.

Old tax regimeNew tax regime
Income₹15 lakh ₹15 lakh
Deductions₹4.85 lakh None
Taxable income₹10.15 lakh ₹15 lakh
Income tax₹ 1.17 lakh₹1.88 lakh
Cess₹ 4,680₹7,500
Total tax liability₹ 1.22 lakh ₹1.95 lakh

And, this might just be the beginning. “It could be a roadmap to doing away with all exemptions and deductions in two to three years time,” said Archit Gupta, CEO and founder of ClearTax.

While this may reduce the burden on the government when it comes to the National Pension Scheme (NPS), it could spell trouble for those who invest in tock market and mutual funds.

“It becomes a demotivator for investment and savings. May make people pull out of tax-saving investments because now the tax angle will not be there anymore. They will need to figure out other options because they need to park it somewhere,” explained Gupta.

However, others may welcome the move to have more cash on hand. “Young learners don’t understand investing very well. This will make it more complex. It will give them more liberty to invest, save or spend their money,” he said.

See also:
A tax expert lists out three questions one should ask before option for new income tax slabs

You'll save ₹78,000 more under new income tax slabs if you earn less than ₹15 lakh

New income tax slabs 2020, income up to ₹5 lakh exempt