Tax season confuses everyone. How much tax will I pay this year? Am I paying too much? Can I save more?
If these questions bother you, you’re not alone. The government keeps changing tax rules. The new income tax slab has made things different again.
Let’s understand everything simply so you can make smart decisions about your money.
What is a Tax Slab?
Think of tax slabs like steps. As your income goes up, you climb higher steps. Each step has a different tax rate.
Lower income = lower tax. Higher income = higher tax.
The government decides these slabs. They tell you how much tax to pay based on what you earn.
The Two Tax Systems Now
Here’s where it gets interesting. Right now, you have two choices:
Old tax regime This has been around for years. You pay tax based on old rates. But you get many deductions – 80C, HRA, home loan interest, and more.
New tax regime This came recently. It has lower tax rates. But you get very few deductions.
You can choose which one suits you better.
New Income Tax Slab Rates
Let’s see the new income tax slab rates for individuals:
- No tax if the income is up to 4 lakh rupees.
- 5% tax if the income falls in the range of 4 to 8 lakh rupees.
- 10% tax if the income falls in the range of 8 to 12 lakh rupees.
- 15% tax if the income falls in the range of 12 to 16 lakh rupees.
- 20% tax if the income falls in the range of 16 to 20 lakh rupees.
- 25% tax if the income falls in the range of 20 to 24 lakh rupees.
- 30% tax if the income is above 24 lakh rupees.
Plus, there’s a standard deduction of 75,000 rupees for salaried people.
Old Tax Regime Rates
For comparison, here are old regime rates:
- No tax if the income is up to 2.5 lakh rupees.
- 5% tax if the income falls in the range of 2.5 to 5 lakh rupees.
- 20% tax if the income falls in the range of 5 to 10 lakh rupees.
- 30% tax if the income is above 10 lakh rupees.
In the old system, you also get deductions like 80C (1.5 lakhs), HRA, home loan interest, and many others.
Using an Online Income Tax Calculator
Doing these calculations manually is tough. This is where an online income tax calculator helps.
How to use it:
Visit any tax calculator website. Most are free to use. Put in your yearly income. Add what you invest and the deductions you get. The tool shows tax for both systems. It also tells which option costs you less.
Why calculators are helpful:
Your time gets saved. Mistakes don’t happen in math. Both options appear side by side. Planning becomes easier. You know the exact amount you’ll pay.
Look for calculators on trusted money websites. Try this when the financial year starts in April. This way, you can plan where to invest your money.
Important Things to Remember
You can switch every year
Not happy with your choice? Change it next year. Salaried people can switch yearly. Just inform your employer at the year start.
Default is new regime
If you don’t choose, the government assumes you’re in the new regime. So declare your choice clearly.
Think before choosing
Don’t rush. Calculate properly. Use the online income tax calculator. See which saves you more money.
Consider future plans
Planning to buy a house? Going to start big investments? Think about these before choosing.
Common Mistakes to Avoid
Not calculating properly
Many people guess which regime is better. Always calculate. What works for your friend might not work for you.
Ignoring deductions
Even in new regime, some deductions are allowed. Don’t miss them.
Last minute decisions
Decide early in the financial year. This gives you time to plan investments.
Not reviewing annually
Your situation changes every year. Review which regime suits you each time.
Tips for Smart Tax Planning
Start early
Don’t wait till March. Plan from April itself.
Keep all receipts
Rent receipts, investment proofs, insurance papers – keep everything organised.
Use online tools
The online income tax calculator is your friend. Use it multiple times during the year.
Track your investments
Know how much you’ve invested under 80C. Track your HRA claims. Monitor home loan interest paid.
Consult if confused
If your finances are complex, talk to a tax advisor. They can guide you properly.
Making Your Decision
Both systems have good points. What’s right for you might be wrong for someone else. Fresh graduates and young workers with basic salaries often pay less under the new system. Those with property loans and regular savings usually do better with the old way.
Get an online income tax calculator. Enter your actual numbers – salary, investments, loans, rent. Check the tax amount in both. The right choice becomes obvious. The new income tax slab was meant to make things easier. Does it work for you? That depends on your financial situation.
**’The opinions expressed in the article are solely the author’s and don’t reflect the opinions or beliefs of the portal’**
