Middle earners may continue with old income tax regime

Even as the government makes the new income tax regime attractive in the budget by offering a higher exemption limit and standard deduction, middle earners may actually prefer to stick to the old regime.

- Dilasha Seth, Gireesh Chandra Prasad

To be sure, those earning less than ₹10 lakh per annum and the super-rich with an income of ₹5 crore and above may choose the new default income tax regime, according to experts. However, central board of direct taxes chairman Nitin Gupta said the number of assessees availing all deductions by making all possible investments would be small.

Calculations by experts show that those earning ₹10 lakh or more per annum will face a tax liability of ₹54,600 under the revised new income tax regime, as against zero liability under the old regime, assuming that the individual claimed all the deductions allowed.

Those earning ₹25 lakh per annum will save ₹34,320 in taxes if they continue under the old income tax regime.

Opting for the new regime would mean foregoing a few deductions that are otherwise available to an assessee such as house rent allowance, interest on housing loan, and tax saving investments.