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New or Old What Smart Taxpayers Are Choosing & Why?

💼 New Tax Regime 2024-25: What Smart Taxpayers Are Choosing & Why

By CA Bhavesh Panpaliya

❓Q1: How popular is the new tax regime now?

💬 Answer: Hugely popular!
Out of 7.28 crore tax returns filed in Ay 2024–25, a massive 72% (5.27 crore) taxpayers opted for the New Tax Regime.

📊 Why the shift?
It’s simpler, has lower slab rates, and offers higher rebates, even though most deductions are removed.

❓Q2: Isn’t the new regime bad for tax saving?

💬 Not entirely. While it removes many deductions like 80C or home loan interest, 3 solid tax-saving tools still remain:

🔹 Standard Deduction – ₹75,000 for salaried/pensioners
🔹 Employer’s NPS Contribution – Up to ₹50,000 or more
🔹 Tax-Free Retirement Benefits – Gratuity, leave encashment, VRS payout

💡 Real-Life Example:

Amit (salaried, Rs. 12 lakh/year)
✅ Standard deduction: ₹75,000
✅ Employer NPS: ₹50,000 tax-free
Taxable income = ₹11.25 lakh → Lower tax despite no 80C!

❓Q3: How does the ₹75,000 standard deduction help me?

💬 It’s automatic and needs no paperwork or investments.

📌 Example:
If your income is ₹10 lakh, standard deduction makes it ₹9.25 lakh taxable — instant tax saving of up to ₹18,200.

❓Q4: Is employer NPS still a good tax benefit?

💬 Yes! Under Section 80CCD(2), employer's NPS contribution is fully tax-exempt:

📊 Up to 10% of salary + DA (or 14% for govt employees).
💰 Max benefit: ₹50,000 (private); ₹1.4 lakh (govt)

⏩ Bonus: You don’t need to invest personally — your employer does it, and you save tax!

❓Q5: What retirement benefits are still tax-free?

💬 You still enjoy exemption on major payouts:

🧾 Retirement Benefit

Private Sector

Govt Employee

Gratuity

Up to ₹20 lakh

Fully exempt

Leave Encashment

Up to ₹25 lakh

Fully exempt

VRS Benefits

Up to ₹5 lakh

Up to ₹5 lakh

These add huge tax-free chunks to your retirement corpus!

❓Q6: Old vs New Regime – how to decide smartly?

💬 Use the "Break-Even Deduction Rule":

Gross Income

Deductions Needed for Old Regime to Win

₹13 lakh

₹4.87 lakh

₹24 lakh

₹7.75 lakh

🔍 Tip: If your actual deductions (80C, HRA, 80D, home loan interest) are less than break-even → New Regime is better.

💡 Handy Trick:

If you're earning ₹15 lakh and only have ₹2 lakh in deductions, old regime tax is more than new regime tax.
👉 Choose new regime and save smartly!

❓Q7: So, is the new regime still tax-efficient?

💬 Absolutely — if used wisely.

📌 Example:
Salary = ₹15 lakh

  • Standard deduction: ₹75,000
  • Employer NPS: ₹50,000 tax-free
    Taxable = ₹13.75 lakh

Add tax-free gratuity or VRS, and the benefits compound.

✅ Final Thoughts:

✔️ Simplicity + lower tax rates
✔️ Still offers meaningful exemptions
✔️ Best suited for those without heavy deductions

🧠 Pro Tip: Use your Form 16 and deductions list to simulate both regimes annually.

💬 Have questions about choosing the right regime?
📲 Reach out: CA Bhavesh Panpaliya | +91 8888755557



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