The old tax system and the new tax regime are the two options available to taxpayers under the Income Tax Act. If you ask me which tax regime is better for 4 lakhs, I will say the new tax regime is clearly the better choice. Here’s why:
Under the new regime for FY 2025 to 26 (AY 2026 to 27), the tax-free threshold is Rs 4 lakh, followed by just 5% on income from Rs 4 onwards to 8 lakh.
With taxable income exactly at Rs 4 lakh, you owe zero tax. It is because of both the 75,000 standard deduction and the Section 87A rebate.
In contrast, the old regime offers zero tax only up to Rs 2.5 lakh; income from Rs 2.5 to 5 lakh is taxed at 5%. So at Rs 4 lakh, you'd pay Rs 7,500 plus cess unnecessary compared to the new regime.
The old regime does allow deductions like Section 80C (up to Rs1.5 lakh), health insurance (80D), and HRA.
For Rs 4 lakh salary, go with the new tax regime zero tax because of the minimal hassle, and simplified filing. Only consider the old regime if you foresee substantial deductions (especially 80C + 80D, etc.) totaling over Rs 1.25 lakh.
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Which Tax Regime is Better for 4 Lakhs?
ruchi
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5 months
2025-07-13T07:30:53+00:00 2025-07-13T07:30:55+00:00Comment
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