Income Tax Calculation: Old vs New Tax Regime: Which is Better for Income Between 8 Lakh to 15 Lakh? Check Detailed Calculation
Income Tax Calculation: Choosing the right income tax regime—Old or New—remains a persistent dilemma for taxpayers every year before filing their ITR. This decision is particularly tricky for individuals with a taxable income ranging between ₹8 lakh and ₹15 lakh.
While the New Tax Regime entices taxpayers with lower slab rates, it removes the benefit of most traditional deductions. Conversely, the Old Tax Regime comes with higher tax rates but allows significant tax-saving opportunities through various sections like 80C, HRA, and Home Loan interest. To make the most financially sound decision, one must look at the numbers closely.
Assessing the Best Option Based on Income
To help you decide, here is a breakdown of the “breakeven point” for different income levels. This point represents the minimum amount of deduction you need to claim to make the Old Regime more profitable than the New one.
1. Annual Income: ₹8 Lakh
For an income of ₹8 lakh, the New Tax Regime is generally the winner. Under this system, income up to ₹3 lakh is exempt, and a rebate under Section 87A makes income up to ₹7 lakh tax-free. Adding the Standard Deduction of ₹75,000 means individuals earning up to ₹7.75 lakh pay zero tax.
- Verdict: To pay less tax in the Old Regime compared to the New one, your total deductions must exceed ₹2.15 Lakh. If your investments (PF, LIC, Tuition fees, etc.) are below this threshold, stick to the New Tax Regime.
2. Annual Income: ₹10 Lakh
The gap between the two regimes widens at the ₹10 lakh mark. In the New Regime, tax is calculated on wider slabs with rates of 5%, 10%, and 15%. However, in the Old Regime, income between ₹5 lakh and ₹10 lakh is taxed at a flat 20%.
- Verdict: The Old Tax Regime is only beneficial at this level if you can claim deductions totalling more than ₹3,00,000. If your claims are below ₹3 lakh, the New Regime will save you more money.
3. Annual Income: ₹12 Lakh and ₹15 Lakh
As income rises, the dependency on deductions to save tax increases significantly.
- For ₹12 Lakh Income: You should opt for the Old Tax Regime only if your total allowable deductions are above ₹4.18 Lakh. Otherwise, the lower slab rates of the New Regime offer better savings.
- For ₹15 Lakh Income: Income above ₹15 lakh hits the 30% bracket in the New Regime, but the concessional rates apply to the amount below it. In the Old Regime, anything above ₹10 lakh is taxed at 30%. Therefore, to beat the New Regime’s savings, you need a massive total deduction of roughly ₹4.58 Lakh. This typically requires a combination of Section 80C limits, health insurance premiums, and substantial Home Loan interest or HRA.
Quick Reference: Breakeven Deduction Table
Refer to the table below. If your total tax-saving investments/expenses are higher than the amount shown for your salary, choose the Old Regime.
| Annual Salary | Minimum Deduction Required (Breakeven) |
|---|---|
| ₹ 8 Lakh | ~ ₹ 2,12,500 |
| ₹ 10 Lakh | ~ ₹ 3,00,000 |
| ₹ 12 Lakh | ~ ₹ 4,18,000 |
| ₹ 15 Lakh | ~ ₹ 4,58,000 |
Conclusion: Which Path to Choose?
For the majority of salaried employees who do not have an ongoing Home Loan or do not claim a high amount of HRA, the New Tax Regime is usually the default best option. It is simpler, requires no investment proof, and puts more disposable income in your hand.
However, the Old Tax Regime remains the superior choice for those who:
- Pay significant rent and can claim high HRA exemptions.
- Are paying interest on a Home Loan (deductible up to ₹2 lakh).
- Maximize their Section 80C (₹1.5L) and Section 80D limits.
Taxpayers are strongly advised to use an online income tax calculator to compare their specific liability before filing.
