Recently, one of my friend’s sisters asked me, which tax regime is better for 5 lakhs salary. I informed her, for an annual income of Rs 5 lakhs in India, the new tax regime is the better option for most salaried individuals. I have shared the reasons below.
Which Tax Regime is Better for 5 LPA?
According to me, the new tax regime is better. Under the new tax regime for FY 2024 to 25,
Income up to Rs 3 lakh: 0%
Rs 3 to 7 lakh: 5% tax rate
Plus a standard deduction of Rs 75,000
Crucially, the Section 87A rebate wipes out tax liability up to Rs 7 lakhs, so someone earning Rs 5 lakhs owes zero tax.
In contrast, the old regime has higher slabs:
0 to 2.5 lakh: 0%
2.5 to 5 lakh: 5%
Without deductions, a Rs 5 lakh income would incur a basic tax of Rs 12,500 under the old regime.
The old regime allows deductions like:
Standard deduction (Rs 50,000)
Section 80C (up to Rs 1.5 lakh)
HRA, 80D, etc.
However, unless total taxable deductions top roughly Rs 1.75 lakh, the old regime may still result in some tax. If you make Rs 5 lakh a year and don't have any large deductions, it might be simpler to file under the new rule.
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Which Tax Regime is Better for 5 Lakhs?
pragati
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5 months
2025-07-13T07:33:19+00:00 2025-07-13T07:33:21+00:00Comment
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