When it comes to decoding the direct tax laws in India, it can be an unnerving job for a lot of us. The old regime governing the tax on revenue in India was currently a demanding job for the taxpayers just when the government decided to come up with an optional new regime of revenue tax introduced in the Budget 2020.
However, the government intended to give relief by simplifying the process and cutting the dependency on consultants for folks and HUF taxpayers but the ease in the new program appears only illusive.
The most recent regime came as a mixed blessing, which reduces the tax prices on the revenue slabs but with a situation to sacrifice most of the deductions readily available beneath the old regime. This has designed the circumstance wherein, though the taxpayers have dual selections to pick out from though paying the Income-tax, they are in a muddle to choose what fits them greatest, primarily since of disparities in positive aspects and losses amongst each the regimes.
New Regime Vs Old Regime
We can opt for the New Tax Regime or Old Tax Regime at any point in time prior to filing the final Income tax return for that distinct year. Although an employer could have thought of the Old Tax Regime and has produced Tax computations/deductions based on that if the Taxpayer desires to opt for the New Tax Regime he/she can do so at the time of Tax Filing. If it turns out that the Tax Payable employing the New Tax Regime is significantly less than the Tax Payable employing the Old Tax Regime that was made use of by the employer, the Taxpayer can claim a tax refund in the course of ITR Filing.
So let us take an instance to recognize clearly:
Example: Employee Name: Gauri
Income Includes
Gross Salary: 11,00,000 (Includes HRA of 240,000)
Interest on property Loan taken: 200,000
Interest from Savings Bank: 20,000
80C Investments: 150,000
Tax Computation beneath each the regimes as follows
Particulars |
Old Tax Regime |
New Tax Regime |
Income From Salary |
||
Gross Salary |
11,00,000/- |
11,00,000/- |
Less : |
||
Standard Deduction |
50000 |
|
House Rent Allowance |
240000 |
|
Net Taxable Salary Income –(1) |
810000 |
1100000 |
Income From House Property |
||
Self Occupied |
||
Interest on housing Loan |
200000 |
– |
Net Income taxable beneath IFHP—(2) |
(200000) |
– |
Income From Other Sources |
||
Interest from Savings Bank |
20000 |
20000 |
Income Taxable beneath IFOS–(3) |
20000 |
20000 |
Gross Taxable Income (1+2+3) |
6,30,000/- |
11,20,000/- |
Deductions: |
||
80C Deductions |
150000 |
|
80TTA : Interest From Savings Bank Account |
20000 |
|
Total Deductions |
170000 |
|
Net Taxable Income |
460000 |
|
Old Tax Regime : Tax slab prices Up to 2,50,000 : – % From 2,50,001 to 5,00,000 :- 5% From 5,00,001 to 1000000 :- 20% More than 1000000 :- 30% |
10,500/- |
|
New Tax Regime Up to 2,50,000 :- % From 2,50,001 to 5,00,000 :- 5% From 5,00,001 to 7,50,000 :- 10% From 7,50,001 to 10,00,000 :-15% From 10,00,001 to 12,50,000 :- 20% From 12,50,001 to 15,00,000 :-25% More than 15,00,000 :- 30% |
12500 25000 37500 24000 |
|
Total Tax Payable Less : Rebate U/s 87A Tax Payable After Rebate Higher Education cess @4% Net Tax Payable |
10,500 (10,500)
|
99,000 – 99,000 3960 102960 |
So which regime is valuable?
Prima facia, it can nonetheless be observed that the taxpayers who do not have lots of deductions to claim can opt for the new regime, and these who have substantial deductions to claim resulting in reduce tax can continue with the old regime.
However, the query remains a point of bias exactly where no straight-jacket formula can give a clear distinction amongst each the selections in basic, and it depends on case to case basis as to what fits greatest for a taxpayer’s advantage.
Disclaimer Note: Here I am not recommending the Old Tax Regime or New Tax regime, Our objective is to pick out lucrative selections amongst these two Tax regimes, it can be accomplished by performing comparative evaluation.
by, Lionel Charles, CEO, IndiaFilings