1. What is the New Tax Regime?

The new tax regime was introduced in Budget 2020 as an alternative to the existing tax structure. It offers lower tax rates but comes with the condition that taxpayers must forgo most deductions and exemptions available under the old regime.

2. How Tax Calculation Works

The calculator uses the following formula:

Where:

• Taxable Income — Total income after standard deduction (if any)
• Rate — Progressive tax rates based on income slabs
• Rebate — Under section 87A (if applicable)

Explanation: The new regime has different tax slabs for different categories of taxpayers (individuals, senior citizens, super senior citizens). The tax is calculated progressively on each slab.

3. Key Features of New Regime

Details:

• Lower tax rates compared to old regime
• Fewer deductions and exemptions available
• Standard deduction of ₹50,000 available for salaried individuals
• Rebate under section 87A for income up to ₹7 lakh
• 4% health and education cess on total tax

4. Who Should Choose New Regime?

Tips: The new regime may be beneficial for:

• Those who don't have many investments eligible for deductions
• Individuals with income below ₹15 lakh (varies case by case)
• Those who prefer simplicity over tax planning

5. Frequently Asked Questions (FAQ)

Q1: Can I switch between old and new regimes every year?
A: Yes, you can choose the regime each year as per your convenience.

Q2: What deductions are available in new regime?
A: Only a few deductions like standard deduction (₹50,000 for salaried), transport allowance for divyang, and deductions under section 80CCD(2).

Q3: Is there any age limit for new regime?
A: No, but tax slabs vary for senior and super senior citizens.

Q4: How is rebate under section 87A calculated?
A: For income up to ₹7 lakh, rebate is lower of tax or ₹25,000 (new regime).

Q5: When is cess applied?
A: 4% health and education cess is applied on the final tax amount after rebate.