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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.
This document covers
The new tax regime provides for concessional rates of taxes for multiples slabs whereas old regime provides for standard rates of taxes
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 4 lakhs | Nil |
| 2 | From Rs 4,00,001 to Rs 8 lakhs | 5% |
| 3 | From Rs 8,00,001 to Rs 12 lakhs | 10% |
| 4 | From Rs 12,00,001 to Rs 16 lakhs | 15% |
| 5 | From Rs 16,00,001 to Rs 20 lakhs | 20% |
| 6 | From Rs 20,00,001 to Rs 24 lakhs | 25% |
| 7 | Above Rs 24 lakhs | 30% |
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 3,00,000 | Nil |
| 2 | From Rs 3,00,001 to Rs 7,00,000 | 5% |
| 3 | From Rs 7,00,001 to Rs 10,00,000 | 10% |
| 4 | From Rs 10,00,001 to Rs 12,00,000 | 15% |
| 5 | From Rs 12,00,001 to Rs 15,00,000 | 20% |
| 6 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 3,00,000 | Nil |
| 2 | From Rs 3,00,001 to Rs 6,00,000 | 5% |
| 3 | From Rs 6,00,001 to Rs 9,00,000 | 10% |
| 4 | From Rs 9,00,001 to Rs 12,00,000 | 15% |
| 5 | From Rs 12,00,001 to Rs 15,00,000 | 20% |
| 6 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
| S.No | Slab | Tax Rates |
|---|---|---|
| 1 | Upto Rs 2,50,000 | Nil |
| 2 | From Rs 2,50,001 to Rs 5,00,000 | 5% |
| 3 | From Rs 5,00,001 to Rs 7,50,000 | 10% |
| 4 | From Rs 7,50,001 to Rs 10,00,000 | 15% |
| 5 | From Rs 10,00,001 to Rs 12,50,000 | 20% |
| 6 | From Rs 12,50,001 to Rs 15,00,000 | 25% |
| 7 | More than Rs 15,00,000 | 30% |
| Individuals and HUF opting New Regime u/s 11BAC are not liable to Alternate Minimum Tax (AMT) | ||
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
Due to privacy issues, generally the employers in other major countries do not consider your other income in calculating TDS or withholding tax.
But in India with the Old Tax Regime, often times, employers go overboard in asking more information than it's really needed. This not only puts burden on employer and it's HR department / function but also crosses the line of what's actually needed and what's being asked.
Hence, new tax regime in a way stop this practice and to have the employee takes care of the taxes for salary and any other income or investments.
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.
In addition, starting from FY 2023-24 (AY 2024-25), new rules, restrictions in switching the tax regimes. Refer the Old or New Income Tax Regime — Switching Rules for more information.
Choose Old or New tax regime using Income Tax Calculator that compare side by side
Visit Tax CalculatorGet Expert Tax Consultation Online to speak to you and prepare, identify the right tax regime
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Disclaimer: This article provides an overview and general guidance, not exhaustive for brevity. Please refer Income Tax Act, GST Act, Companies Act and other tax compliance acts, Rules, and Notifications for details.