Old vs New Tax Regime: Finance Minister Nirmala Sitharaman had started the New Tax Regime in the Union Budget 2020. It has lower tax rates with fewer tax deductions and exemptions compared to the old tax regime. According to income tax rules, you can select any one of two tax regimes. You can select this every year. The decision to switch from the old regime to the new tax regime depends on your income, potential tax deductions, total tax etc.
Old vs New Tax Regime: Lower tax rates under the new tax regime may result in lower tax liability for many taxpayers. However, it also means eliminating or reducing various deductions and exemptions available under the old tax regime. If you want to see whether coming to the new tax regime is beneficial for you or not, then for this you will have to calculate both the tax regimes. In this, your income, deductions, exemptions and applicable tax slab rate will have to be kept in mind.
Let us tell you that it can be beneficial for those people who get the benefit of lower tax rate in the new tax regime. For example, if you are a salaried class and your annual income is less than Rs 7.5 lakh, then you will not have to pay any tax in the new tax regime. Apart from this, the new tax regime can also be beneficial for employees with income of more than Rs 5 crore due to low surcharge.
It is important to evaluate the deductions and exemptions available under each tax regime. Even though a lot of deductions and exemptions are available in the old tax regime. But there are less options in the new tax regime. The usual exemptions and deductions available to salaried class like HRA, travel travel allowance, 80C, 80D (medical insurance) etc. are not available under the new regime. However, standard deduction for salaried class and investment in NPS is available under both the regimes.
According to experts, business people can choose the old tax regime. This will remain applicable for all the coming years. However, the exemption to go back to the new tax regime is available only once. Once returned, you will never be eligible to choose the old tax regime in future.
The new tax regime has become the primary regime from the financial year 2023-24. This simply means that if you do not choose to opt for the old tax regime while filing your tax return, then the Income Tax Department will charge the tax rate under the new regime and while processing the return, will take into account the same deductions and exemptions which are available in the new regime. Meet under.
Let us tell you that before choosing a new tax regime, any person should think whether it will fulfill his financial goal or not and whether his tax situation will be better or not. Only then should they choose one regime
