Understanding the New Tax Regime: Is It Better for Your Finances? Explore with Our Excel Tool

Dear All,

Tax Computation Methods Overview

The Finance Act 2020-21 provides all taxpayers with the option of choosing between two types of tax computation methods. These two methods have different tax slabs and tax rates.

Existing Tax Computation Method

The Existing Tax Computation method gives you tax benefits on all your investments, rent payments, home loan, education loan repayment, standard deduction, and various reimbursements.

New Tax Computation Method

The New Tax Computation method, on the other hand, does not provide tax benefits on the above-mentioned investments and expenses. It is more beneficial for those taxpayers who do not have any investments and are not taking tax benefits on education/home loan repayments.

Using the Tax Calculator

To determine which method is better for you, please find attached a tax calculator. Provide your salary and investment details in highlighted yellow cells in the "Salary and Investments" sheet and check your per month tax under both methods in the next sheet ("Tax Current Vs New Method").

Feel free to reach out for any clarifications or corrections.

The new tax regime introduced in the Finance Act 2020-21 offers taxpayers the choice between the existing tax computation method and the new tax computation method. The existing method provides tax benefits on various investments and expenses like rent payments, home loan, education loan repayment, and standard deduction. On the other hand, the new method does not offer tax benefits on these investments and expenses, making it more suitable for individuals without such investments or those not availing tax benefits on education or home loan repayments. To determine which method is more beneficial for you, use the provided tax calculator by entering your salary and investment details. Compare the per month tax under both methods to make an informed decision based on your financial circumstances.