New vs Old Tax Regime: The due date of Income Tax Return (ITR) filing for Financial Year 2020-21 has been extended till 31st December 2021. So now you have some more time for filing the tax returns and deciding on what to pick out involving the new tax regime and the old regime. The Income Tax Act delivers you with an solution to shift from the old tax regime to the new tax regime and vice versa on an annual basis. However, you could nonetheless be asking yourself about which regime will be superior for you.
Experts recommend that deciding upon the ideal tax regime does not rely only on the salary level but also other components such as whether or not you have made investments in specified eligible deductions, whether or not you have a housing loan, and so forth.
According to Dr Suresh Surana, Founder, RSM India, frequently the new tax regime is acceptable for these, who do not want to avail investment-based deductions and want brief term liquidity in their hands for varied purposes, such as job loss, salary deduction, emergency fund, health-related expenditure, other instant contingencies, and so forth.
ALSO Study | Top blunders to keep away from whilst filing Income Tax Return (ITR) for AY 2021-22 this month
“Also, it depends on the salary levels, as those in the salary range of up to Rs. 15 lakhs may have more inclination to opt for the new tax regime as compared to those falling in higher tax brackets, as the basic tax rates are lower for income up to Rs. 15 lakhs,” Dr Surana told FE Online.
The Finance Act 2020 introduced a new private tax regime for person taxpayers which delivers for concessional tax prices.
However, solution for such concessional tax regime calls for the taxpayer to not avail particular specified deductions like:
- 10(13A) – House Rent Allowance
- 10(5) – Leave travel Concession
- 10(14) – Special allowance detailed in Rule 2BB (such as children education allowance, hostel allowance, and so forth. other than transport allowance, travel allowance, each day allowance).
- 10(17) – Allowances received by MP, member of state legislature, and so forth.
- 10(32) – Clubbing advantage of Rs. 1500 per minor youngster
- 10AA – Deduction for SEZ unit
- Section 16 – Standard Deduction of Rs. 50000, Entertainment Allowance, Professional Tax
- 24(b) – Interest on borrowed loan for a Self Occupied home or Vacant Property u/s 23(2)
- 32(1)(iia) – Additional Depreciation
- 32AD – Investment Allowance for investment in Andhra Pradesh/Telangana/Bihar/West Bengal
- 33AB – Tea / Coffee / Rubber Development
- 33ABA – Site Restoration Fund
- 35(2AA) – Deduction for Payment to National Laboratory or University or IIT
- 35AD – Deduction in respect of specified small business
- 35CCC – Expenditure on an agricultural extension project
- 57(iia)- Family pension
- Any provision of chapter VI – A – section 80C, 80D and so forth. However, Section 80CCD(2) (employer contribution on account of the employee in a notified pension scheme), section 80JJAA deductions are accessible even in the New Tax regime.
“Ideally, the choice of beneficial option between the old tax regime and new tax regime depends upon the composition of the nature of income of the taxpayer as well as the investments made,” stated Dr Surana.