Budget 2020 has introduced the new tax regime for FY 2020-21 in addition to the old tax regime. FY 2020-21 onwards the taxpayer can choose the best tax regime based on the tax saving potential, practicality, and immediate needs.
The new regime provides for concessional rates of taxes for multiples slabs whereas old regime provides for standard rates of taxes
|Tax Slab||Old Regime||New Regime|
|0 – 2,50,000||0%||0%|
|2,50,000 – 5,00,000||5%||5%|
|5,00,000 – 7,50,000||20%||10%|
|7,50,000 – 10,00,000||20%||15%|
|10,00,000 – 12,50,000||30%||20%|
|12,50,000 – 15,00,000||30%||25%|
|More than 15,00,000 *||30%||30%|
Above Rs. 50L taxable income attracts Education cess is 4% and Surcharge starts @ 10%.
The new tax regime does not allow the taxpayer to avail certain deductions and exemptions whereas the old regime provides that the taxpayer can claim deductions and exemptions which are available to him.
Some of the deductions that the taxpayers will be loosing if they select the new regime are
New Tax Regime provides an opportunity to increase the take home salary of the taxpayer and is not required to invest upfront, whereas the old tax regime reduce take home as the taxpayers is required to invest in certain long-term investments to avail the benefits.
Under New tax regime, the taxpayer need not worry about the documentation and compliances as most of the exemptions and deductions are not available. Whereas the taxpayers under old regime need to have all the proofs, and in many cases the employee need to submit such proofs to the employer for claiming deductions and exemptions
There is a lot of confusion regarding which regime to pick. But selecting the right regime helps in optimization of taxes and wealth creation in future. The Taxpayer needs to evaluate both the regimes depending on the income, deductions, exemptions etc and select the right regime.
The tools available to correctly select the right tax regime are to use an 1) Old vs New Tax Calculator or 2) Taking an Expert Tax Consultation from EZTax.in to review, suggest the correct one.
Choose Old or New tax regime using Income Tax Calculator that compare side by sideVisit Tax Calculator
Get Expert Tax Consultation Online to speak to you and prepare, identify the right tax regimeHow to start Tax Consultation
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