An additional benefit in the new tax regime has been approved in the budget amendment to the finance bill 2023. We have modified our free New Tax Regime vs Old Tax Regime Calculator to reflect this change.
Before the amendment, a person with a net taxable income of Rs. 7 lakhs paid no tax in the new tax regime (NTR). However, if the net taxable income increases to seven lakhs and five thousand, the tax (before cess) becomes 25,500!
To correct this anomaly, the new tax regime has been amended. If the net taxable income is above Rs. 7 lakhs AND if the income tax is greater than taxable income minus seven lakhs, then the tax to be paid is = taxable income minus seven lakhs.
So in the above example, the tax before cess is Rs. 25,500, but taxable income minus seven lakhs is only Rs. 5000. So the tax to be paid before cess is the lower of two or Rs. 5000. With cess, the total tax is Rs. 5,200. This is known as the “second relief under section 87A” The first relief is explained here: Why salary up to seven lakhs will be tax-free from 1st April 2023
This benefit applies to a net taxable income of Rs. 7.27 lakhs. After that, taxable income minus seven lakhs will become greater than the tax before cess, so the latter will be used.
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New Tax Regime vs Old Tax Regime Calculator (revised after budget amendment in March 2023)
This is the screenshot of the input page where the user can modify the black cells.
Credit: Thanks to Manmohan Sethumadhavan for intimating this change and checking the calculator.
Latest (after Budget amendment March 2023): Old tax regime vs new tax regime (up to march 31st, 2023) vs new tax regime (from 1st April 2023) calculator. (please let me know if there are any bugs).
Update: Reader Balasubrahmanyan has modified the old tax regime vs the new tax regime tool “to include a few deductions, especially employer contribution to NPS.
Also, sections to calculate surcharge and marginal relief are added”.
Use if your income is higher than 50L only: Old tax regime vs new tax regime (up to march 31st, 2023) vs new tax regime (from 1st April 2023) calculator (please let me know if there are any bugs). This will not contain the second relief under section 87A, as it is irrelevant.