Although there are six tax blocks, it may not be advantageous for all taxpayers if the tax administration decides to abolish the old regime altogether. From the example above, it is clear that no matter if you are at 20% or 30%, the existing system is better for the one that takes all the basic deductions that are usually claimed by people. Let`s move on to an example where the person has an income of up to Rs. 7 lakhs and has to pay taxes of Rs. 32,500 / if he chooses a new regime. However, if he is able to claim a deduction from Article 80C for Rs. 1.50 lakhs and a deduction of Rs. 50,000/- under Article 80 CCD(1B) for NPS and reduce his total income below 5 lakhs, he will not have to pay tax by claiming refund u/s 87A up to Rs.12, 500 / -. By investing two lakh rupees, you can save taxes. Rs. 32,500/- remaining under the old regime. However, this system will work for self-employed individuals who do not want to save money on eligible investments to claim various deductions. Welcome, Vishal.
We are pleased to have been able to simplify both tax regimes for you. Share it with your friends as well so we can reach more readers. It is important to note that each taxpayer should calculate income tax, consider their tax-saving investments, and then choose the plan. In Example 2, the existing tax system is advantageous for an income of Rs 10 lakh of Rs 3,099. While determining whether to choose the old or new tax system may seem complicated, it`s not that hard to understand if you approach it systematically. Thank you AND Money if you assume my CTC is 7lakh, which diet is best And if you`re wondering how to know if you should opt for the new or old tax system, this blog answers that question for you. We look at the new regime in detail, its advantages and compare it with the existing tax system. So let`s get started. As you can see, Ramit will save more taxes by opting for the new tax system instead of the old one, thus reducing the tax burden by Rs 1,560. The new tax regime does not provide for 70 deductions and exemptions (see paragraph 4). The tax payable under the new system and the existing system, without claiming deductions and exemptions, is as follows: Can you please tell me if my package is 9 lakh and CTC 7.84 lakh, which tax system should I choose? Please help me Dear K Madhusoodhanan, You can choose the old tax system or the new tax system every year. This allows you to switch from the old to the new and vice versa at the beginning of each exercise depending on your needs.
There is a lot of confusion about the new tax system. People can`t decide which one to choose. The new tax system is only available to individuals and a HUF, whether you are resident or non-resident, and is optional. The new tax system offers you preferential rates up to the total taxable income of Rs. 15 lakhs with tax plates of 5%, 10%, 15%, 20% and 25% on income plates from 2.50 lakhs from the basic exemption of Rs. 2.50 lakhs. If you want to take advantage of the reduced rates of the new tax system instead of the existing tax blocks, you have to forego various tax deductions and exemptions available in the old tax system. For those who do not have business income, they must exercise the option each year by filing Form 10IE with the ITR, but before the ITR filing due date. i.e. July 31 and the once-based option for a given year cannot be changed if you wish to submit a revised return.
Therefore, please consider all income, exemptions and deductions when choosing the system for a given year. Please note that your employer`s decision to opt for the new tax regime will not be considered the exercise of this option under income tax laws. The exercise of the option with the employer is limited and you can choose to opt for another system when filing the ITR. Please make sure to submit your ITRs before the due date if you wish to opt for a new tax regime, as this option will no longer be available after the due date. However, you can stay in the old diet one year and in the new diet the next. Let`s take three examples with different scenarios to see how deductions and exemptions, or lack thereof, affect taxes under the new tax system compared to the old system. As you can see, the new tax system works better in this case as well. In fact, under the old tax system, Amit will end up paying 4,763 rupees more in taxes. However, this does not mean that he should stop investing or stop his risk insurance. Tax benefits should not be seen as a benefit and a primary reason to invest or purchase insurance.
From a tax planning perspective, the choice of tax system at the beginning of the fiscal year is crucial. A taxpayer must compare the income tax of the new tax system with the existing tax. Once the taxpayer has chosen the tax regime at the beginning of the year, TDS or pre-tax investments and calculations are made accordingly. In addition, the taxpayer must submit Form 10IE to the income tax department before filing the tax return if they intend to opt for the new tax system. Dear Kumar, thank you very much for your question. Under the new tax regime, you cannot claim a tax deduction for FP or NPS. These 80C deductions are only available under the old tax system. The new tax system differs from the old one in two ways. Unfortunately, there is no one-size-fits-all answer. And the culprit is again the complexity of India`s tax regulations. Those with business income must exercise the option once and for all by filing Form 10IE before the ITR filing due date, although the ITR may be filed later. Such a person may choose to opt out of the new tax system only once, and then cannot return to the new tax system unless there is no business income for that year.
So you have to be very careful when deciding on a new tax system, because you have business income and you have to consider the composition of income not only for the relevant years, but also for all future years. You can inform the employer of the option – New Tax System or Old Tax System. However, at the time of submission of the ITR, you may choose the option to submit the ITR, regardless of which option was provided to the employer. This is because you can switch between the new and old tax system when you file the ITR. If, as an employee, you do not make such an announcement, the old tax regime applies in this case. The tax rates under the new and existing tax systems are as follows: Here`s how the tax rates under both regimes work: The examples given are very effective and easy to understand, which will help many people decide on their tax system. To add to this confusion, the Minister of Finance has left taxpayers the choice between the new regime and the existing one, leaving it up to them to choose which one to choose. All of these factors work together, instead of simplifying tax laws, they are now more complex. 2.
Reduction u/s 87-A resident whose total income does not exceed ₹5,00,000 is also entitled to a refund of up to 100% of income tax or ₹12,500, whichever is lower. This reduction is available in both tax regimes With the introduction of a new tax regime comes the confusion of which one suits you.