Its time to submit the declaration to the employer, by opting old or new tax regime, many of us have questions regarding which scheme would be beneficial, so that we can save the tax. Let us understand the related concepts and get it resolved.
Background of New Scheme:
In the Budget Speech delivered by our Honorable Finance Minister for FY 2020-21, it was stated that, In order to provide significant relief to the individual taxpayers and to simplify the Income-tax law. I propose to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions.
Slab Rates as per Old Tax Regime and New Tax Regime:
|
Taxable Income Slab(Rs) |
Existing Tax Rate | New Tax Rate |
|
0-2.5 Lakh |
Exempt |
Exempt |
|
2.5-5 Lakh |
5% |
5% |
|
5-7.5 Lakh |
20% |
10% |
|
7.5-10 Lakh |
20% |
15% |
|
10-12.5 Lakh |
30% |
20% |
| 12.5-15 Lakh | 30% |
25% |
| Above 15 Lakh | 30% |
30% |
Popular Exemptions/Deductions Foregone in New Tax Regime:
- HRA(House Rent Allowance)
- Interest on Housing Loan
- Standard Deduction
- Chapter VI-A Deductions which include 80C,80D,80DD among others
Case Studies:
The consequences in terms of tax savings or tax payable, by opting existing regime or the are new tax regime are drawn by doing following case studies.
Case-1-Individual not claiming any exemptions/deductions.
|
Gross Salary Income Level |
Tax Payable in Existing Regime | Tax Payable In New Regime |
Additional Tax Saving/(payable) |
|
At 7.5 Lakh |
65,000 |
39,000 |
26,000 |
|
At 10 Lakh |
1,17,000 |
78,000 |
39,000 |
|
At 12.5 Lakh |
1,95,000 |
1,30,000 |
65,000 |
|
At 15 Lakh |
2,73,100 |
1,95,000 |
78,100 |
Case-2-Individual Claiming exemptions/deductions
|
Gross Salary Income Level |
Tax Payable in Existing Regime | Tax Payable In New Regime |
Additional Tax Saving/(payable) |
|
At 7.5 Lakh |
33,800 |
39,000 |
(5,200) |
|
At 10 Lakh |
85,800 |
78,000 |
7,800 |
|
At 12.5 Lakh |
1,48,200 |
1,30,000 |
18,200 |
|
At 15 Lakh |
2,26,200 |
1,95,000 |
31,200 |
Published in the general interest of tax payers, please revert in case of any query.
Thank you
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