Income Tax on an Annual Salary of Rs. 8 Lakhs in India: New vs. Old Tax Regimes

As of the financial year 2023-2024, individuals earning an annual salary of Rs. 8 lakhs in India can pay income tax under two different tax regimes: the old tax regime and the new tax regime. Understanding these tax regimes and how they impact your tax liability is crucial for effective tax planning.

Old Tax Regime

In the old tax regime, the income tax slabs are structured as follows:

Up to Rs. 2.5 lakhs: Nil Rs. 2.5 lakhs to Rs. 5 lakhs: 5% Rs. 5 lakhs to Rs. 10 lakhs: 20%

Let's calculate the tax amount for an individual earning Rs. 8 lakhs annually under the old tax regime:

Calculation

Income up to Rs. 2.5 lakhs: Nil Income from Rs. 2.5 lakhs to Rs. 5 lakhs: 5% of 2.5 lakhs Rs. 12,500 Income from Rs. 5 lakhs to Rs. 8 lakhs: 20% of 3 lakhs Rs. 60,000

Total Tax

Total tax Rs. 12,500 Rs. 60,000 Rs. 72,500

Additional Considerations

Individuals may also be eligible for deductions under Sections 80C and 80D, which can reduce their taxable income and subsequently their tax liability.

A health and education cess of 4% is applicable on the total tax calculated.

It's essential to verify the latest tax rules and any updates that may have occurred after August 2023.

New Tax Regime

In the new tax regime, the income tax slabs have been revised to:

Up to Rs. 2.5 lakhs: Nil Rs. 2.5 lakhs to Rs. 5 lakhs: 5% Rs. 5 lakhs to Rs. 7.5 lakhs: 10% Rs. 7.5 lakhs to Rs. 10 lakhs: 15%

Let's calculate the tax amount for an individual earning Rs. 8 lakhs annually under the new tax regime:

Calculation

Income up to Rs. 2.5 lakhs: Nil Income from Rs. 2.5 lakhs to Rs. 5 lakhs: 5% of 2.5 lakhs Rs. 12,500 Income from Rs. 5 lakhs to Rs. 7.5 lakhs: 10% of 2.5 lakhs Rs. 25,000 Income from Rs. 7.5 lakhs to Rs. 8 lakhs: 15% of 0.5 lakhs Rs. 7,500

Total Tax

Total tax Rs. 12,500 Rs. 25,000 Rs. 7,500 Rs. 45,000

Additional Considerations

Similar to the old tax regime, individuals may also benefit from deductions under Sections 80C and 80D, which can further reduce their tax liability.

The health and education cess of 4% also applies to the total tax calculated under the new tax regime.

Summary

When comparing the new and old tax regimes, the tax liabilities are:

Old Tax Regime: Rs. 72,500 New Tax Regime: Rs. 45,000

It's essential to consider these differences when planning your financial strategy.

Additional Tips and Considerations

After only Rs. 80,000 dedication, your tax for the financial year 2020-21 might slightly vary based on the tax slab applied. For instance:

With a financial contribution of Rs. 1,50,000 and according to the old tax regime, the tax amount would be approximately Rs. 33,800. If advance tax is not paid, interest may also be included, potentially increasing the final amount. According to the new tax regime, the tax would be approximately Rs. 46,800, with no additional deductions. Without any deductions, the tax under the old tax regime would be Rs. 65,000, and under the new tax regime, it would be Rs. 46,800.

Given that the new tax regime is applicable, and deductions do not apply, these figures provide a clear picture of the potential savings through effective tax planning.