Tax has always been an important element in financial planning and thus we look and hope every year for some tax benefits from the union budget. This year, Finance Minister Srimati Nirmala Sitharaman introduced a new regime of Tax slabs for Individual Taxpayers where one can benefit from paying a little low tax but at cost of foregoing all deductions and exemptions on Income which were allowed in the old regime. The new regime of taxation will be applicable for AY starting 1st April 2021, which means an individual can file their income earned between 1st April 2020 and 31st March 2021 using the new tax rates.

The catch here is that it is now in the hands of the taxpayers to choose between the old and the new regime of tax slabs after calculating and estimating the real tax benefits from either of the regime. Simply putting, income tax filing has now gone a bit complicated and thus your financial planning. But not a big deal, one must always seek for their financial advisor to get maximum benefits from tax filings with appropriate financial plans.

Let us now check how this new tax regime could benefit or affect our budget! Below is the demonstration of the old and new tax slabs.

Income Tax rates for Individuals below 60 years age

Income Slabs

Tax Rates

Old Regime

New Regime (No deduction and exemption)

Upto 2,50,000



From 2,50,001 to 5,00,000

5% (Rebate of 12,500 u/s 87A)


From 5,00,001 to 7,50,000



From 7,50,001 to 10,00,000


From 10,00,001 to 12,50,000



From 12,50,001 to 15,00,000


Above 15,00,000



As announced, individuals will have the option to choose between the old and new regime after checking the suitability of applicable slabs. There are also conditions that need to satisfy to opt for the new regime. A few important of them are like, individuals will not be allowed to set-off any carried forward losses or depreciation from any previous assessment years, adjustment of losses from the head "Income from house property" will not be allowed with any other income heads.

This might seem that the new regime has no benefits, but it is not true. The effectiveness of the tax slabs will depend on the financial conditions of the respective taxpayers and after checking with multiple iterations and conditions, a simple illustration is provided below:


For Gross Total Income < 10 Lac

For Gross Total Income > 10 Lac

If you have options for exemptions and deduction

New Tax Regime might not benefit you.

New Tax Regime might benefit you.

If you don't have options for exemptions and deduction

New Tax Regime will benefit you.


Now as per the Central Board of Direct Tax (CBDT) IT return statistics for AY 2018-19, approx. 5.5 Crore individuals filled their income and out of them, only about 55 Lac or 10% of individuals have Gross Total Income above 10 Lac. It means the majority of the individuals fall below 10 lac income bracket and assuming most of them would have applied for any of the exemption and deduction, then the old regime of Income-tax slabs will be more beneficial for them as they might have to pay fewer taxes.

In case, an individual does not opt for any deduction or exemptions, then they must at least can invest in any ELSS investment schemes, NPS, PPF or apply for a term plan and health insurance for better financial health. In an overall scenario, we could say that the New Tax regime will affect a very small population of individual Taxpayers as most of them as better tax benefits in opting for the old regime of taxation.