If you earn ₹15 lakh, you save ₹15,600 with the new tax regime but you can’t claim tax benefits worth ₹73,000
- 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.
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.
Assuming ₹1.5 lakh tax exemption under 80(C) and ₹50,000 standard deduction.
|Income||Old regime (without deductions)||Old regime (with deductions)||New regime||Savings|
|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|
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 apply||Exemptions you can still avail|
|Section 80C investments||Standard deduction on rent|
|House rent allowance||Agricultural income|
|Housing loan interest||Income from life insurance|
|Leave travel allowance||Retrenchment compensation|
|Medical insurance premium||VRS proceeds|
|Standard deduction||Leave 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 apply||Deduction amount|
|Section 80C investments||₹1.5 lakh|
|Medical insurance premium||₹25,000|
|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 regime||New tax regime|
|Income||₹15 lakh||₹15 lakh|
|Taxable income||₹10.15 lakh||₹15 lakh|
|Income tax||₹ 1.17 lakh||₹1.88 lakh|
|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.
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
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