The revised income tax slabs of the new tax regime that was announced in Budget 2023 has shifted a break-even point between the old tax regime and the revised new income tax slabs for the salaried, senior citizens and super senior citizens

The break-even point here refers to the maximum deduction one must claim in the old tax regime so that the income tax payable in both regimes is the same. This can help a person decide which tax regime will be better if they are unable to meet a certain level of deduction

According to an analysis by EY India, “If the maximum exemptions and deductions claimed by salaried individuals is more than Rs.4.25 lakh for an income above Rs.15.5 lakh, then he/she may pay less tax in the old tax regime from April 1, 2023.” The exemptions and deductions include the standard deduction of Rs.50,000 which is automatically available to a salaried individual. He/she is not required to submit any document to claim a standard deduction.

Do note that as the salary levels decrease, the deduction and exemption amount will also decrease, while calculating the break-even.

Here is an analysis showing the maximum deductions a salaried individual needs to claim to remain tax neutral in both income tax regimes.

According to the analysis, now the break-even income salary is Rs.7.5 lakh. In the old tax regime, an individual with a salary income of Rs.7.5 lakh claiming maximum exemptions and deductions of Rs.2.5 lakh will be able to bring down the taxable income to Rs.5 lakh. This makes him eligible for a rebate under Section 87A in the old tax regime and his tax liability becomes zero. If the same individual opts for the revised new tax regime, then he/she can claim a standard deduction of Rs.50,000 (introduced for the new tax regime), claim a rebate under Section 87A (for income upto Rs 7 lakh) in the revised new tax regime and will have a zero tax liability.

Similarly, if an individual with a gross income of Rs.10 lakh opts to claim deductions and exemptions such as Section 80C, 80D, 80TTA, HRA exemption and LTA exemption for a maximum of Rs.3 lakh, then he/she turns tax neutral in both the tax regimes. If the deductions claimed is less than Rs.3 lakh, then the new tax regime will be beneficial for such a salaried taxpayer.

Salaried individuals having an income of Rs.12.5 lakh, and is able to claim deductions (Section 80C, 80D, 80E, 80TTA etc.), tax exemptions on HRA, LTA and standard deductions of Rs 50,000 for a maximum totalling upto Rs.3,62,500, will have a tax payable amount that is same in the old tax regime and the revised new income tax slabs. If the deduction amount claimed is less than Rs 3,62,500, then it is better to opt for the revised new income tax regime.

A salaried individual having a gross income of Rs.15 lakh must claim deductions of more than Rs 4,08,332 to make the old tax regime beneficial for him/her. If the person has a gross income of Rs.20 lakh, then the deductions claim must be for more than Rs 4,25,000 to make the old tax regime beneficial.