New Tax Regime vs Old Tax Regime- Income Tax Slabs 2020-21 - New Tax Exemptions - Which is better? #IncomeTaxslab #NewTaxRegime #OldTaxRegime

 

Government introduces new tax regime in the budget 2019-2020 where government charge low tax rate compare to old one. Also allow to every one to choose either old tax regime or new one. So can we go with New tax regime? Before choose the best Tax regime - we need to discuss below points :

1) What is New Tax Regime?

2) Who can Opt. for this new Tax Regime?

3) How can we take advantage of this regime?

4) New Tax Regime or Old Tax Regime which is better?

1)  Comparison with Old Income Slab vs New Income Slab :

The above diagram shown detail comparison between Old Tax  vs New Tax slab. As per the chart new tax regime is attractive. 

2) Who can Optimize new Tax Regime:

If you under the above scenario then you can avail new tax regime benefits. 

If we choose new tax regime then can we switch with old one. 

There is 2 conditions :

a) If you are solarized person then you can change the tax regime as per your convenience.

For e.g. If you choose New tax regime in the year 2019-2020. You want to switch with old one then you can choose old tax regime in the year 2021-2022.

b) But if you are Individual or HUF and choose new tax regime - then their is no option to switch back to old tax regime. 

As per income tax act  there are multiple deductions and exemption where you can save your income tax.

In the New tax regime we can pay low tax rate but here we can not avail some deductions and exemptions. 

If you choose new tax regime then there are some 70 above tax deductions and exemptions benefits you can not avail. Like - 

But some of the tax deductions benefits you can avail in the new tax regime as well.

Now we need to understand which tax deductions benefits you can not avail in the new tax regime like - 

i.e. ELSS, NPS (National Pension Scheme), PPF (Public Provident Fund) , Mediclaim, LIC, School Fees, Interest on Education loan etc. 

Even If you are salaried or Individual then you can not take benefits of Leave Travel Allowance, House Rent Allowance , 50,000 - Standard Deductions  etc. 

3) Benefits of New tax Regime- 

a) Life Insurance sum assured or maturity amount  is tax free like old one. Section 10 (10D) - 80C Not available.

b) Tax benefits who taken loan on rented out property ,interest can be claimed as deduction under section 24 (b). 

c) PPF & Sukanya Samriddhi Yojana - Maturity benefits is tax free - 80C Not available. 

d) NPS - Employer contribution on account of the employee will continue to be tax free under section 80CCD(2).

4) Which is better- Old Or New- 

We will understand this using below example like - Suppose If your annul salary is 10-Lac-

If you choose New Tax Regime - Tax Liability to be calculated on 10 Lac = 75,000 Income tax you need to pay. 

If you choose Old Tax Regime - Then already you got below deductions like- 

After all deductions the tax Liability to be calculated on 7.5 lac  = 62500 Income tax you need to pay. 

That means if you are avail some tax deductions benefits then definitely you can go with Old Tax Regime.  

Both Tax regime are good at their place. The purpose of introducing new tax regime is -  

 

• You can submit the ITR file easily with low paperwork and avoid the complexity. 
• One another major reason is - someone invest money in various tax saving instrument even which does not fulfill their investment objectives. They just invest the money for saving the tax which is wrong. 

You can choose the best tax regime as per your convenient.

Hope you understand the difference between Old Tax Regime Vs New Tax Regime and which is best for you. 

Thanks. 👍🙏