Are you wondering which tax regime you should opt for? While there is no clear-cut solution to the same, this blog post may go some ways in providing some clarity to this question. We shall detail the new tax regime and have shared the download link to a simple tax calculator prepared by us.
The Budget 2020 has brought a unique concern to the taxpayers through announcement of a new tax regime. It offers more tax slabs and lower tax rates. This was long demanded by most taxpayers, but it came with the catch of removal of all the deductions and exemptions available.
To add to this confusion, the finance minister gave taxpayers a choice between the new regime and existing one, leaving it to the citizens to decide on the basis of their preference. Instead of providing simplicity, understanding the tax regime in India may have become more complex.
Let us understand the new tax regime and what does it bring as a package.
Applicability:
The New tax regime is applicable to resident Individuals and HUF (“Hindu Undivided Family”), from the Financial Year 2020-21.
Proposed Tax Rates:
Health and Education Cess and Surcharge provision remains the same irrespective of the option chosen.
Point to Choose:
Tax payers can either choose to continue with existing tax system or select the new tax regime.
What benefit does it offer?
There are various benefits to this, some of them listed below:
- It provides an opportunity to increase the take home salary to the taxpayers;
- No need to worry about investments/deductions every year;
- Reduced compliances/paperwork as deductions/exemptions are not available;
- Easy and Self-competent payment of taxes and filing of returns;
- A good scheme for small taxpayers for a moderate class income range
What is there to lose:
Under this scheme, there is a list of exemptions/ deductions that have been withdrawn. Here is the list of exemptions/deductions not available anymore – Click.
Currently, under the old regime, the exemptions/ deductions allow you to lower your tax amount by investing, saving, or spending on specific items. However, it also means every year you have to find ways to optimize your salary and savings/investments so as to keep your taxable income to the minimum.
The Choice:
So basically, every person will have his own unique New Tax Slab Vs Old Tax Slab calculations as the deductions claimed by the person may be unique to him. Each individual tax payer ideally has to do their own calculations and depending on the amount of deductions/ exemptions being claimed, it is better to pick the better one between the two.
Here are steps you can follow:
- Ascertain your income under each head;
- Determine your exemptions/ deductions;
- Calculate the tax liability using the tax calculator given below;
- Decide where do you pay less
Tax Calculator:
We have created a simple tax calculator which will help you to determine your tax liability under both the tax regime considering the steps above.
You can access the calculator here – Download Tax Calculator
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Disclaimer
The content of this article is for information purpose only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of the statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
