With this new decision, more and more taxpayers will now choose the new tax system. CBDT Chairman Ravi Agarwal even claimed that 90 percent of taxpayers can switch to the new tax system, which is currently 75 percent.
While presenting the general budget on February 1, Finance Minister Nirmala Sitharaman made a big announcement on the new tax system. Now taxpayers will not have to pay any kind of tax on income up to ₹ 12 lakh per annum. This will attract taxpayers to the new tax system. With this new decision, more and more taxpayers will now choose the new tax system. CBDT Chairman Ravi Agarwal even claimed that 90 percent of taxpayers can switch to the new tax system, which is currently 75 percent.
Will the justification of investing to save tax end?
In such a situation, the justification of investing in schemes like PPF (Public Provident Fund), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY) to save tax will end. Let us tell you that in the old tax system, tax can be saved by investing in small savings schemes like ELSS, PPF, Sukanya under section 80C. Talking about section 80D, payment of medical insurance premium up to the maximum limit of ₹ 25,000 and ₹ 50,000 for senior citizens also helps in saving tax. Apart from this, payment made for pension fund premium in section 80CCC is also a tax saver.
What do experts say
Experts say that if you are opting for the new tax system, you will not be eligible for any exemptions/deductions available in income tax except standard deduction and NPS deduction (employer share). This means that deductions under sections 80C, 80D, interest on home loan, HRA etc. are not allowed. Some people believe that it is still okay to continue investing in tax-saving instruments as investments should ideally be seen separately from tax-savings.
Sridharan S, Founder, Wealth Ladder Direct says that investors will now have more options with regards to investing. Retail investors do not need to invest only for the purpose of tax saving and then block their money for 3 years (ELSS) or 15 years (PPF). They can now plan their future in a better way based on their requirement.
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