There is about a week left to file income tax returns. If you have not filed the return yet, then it is important for you to check which of the new and old regimes is more beneficial for you. The Finance Minister has made several announcements in the Union Budget to increase the attraction of the new regime
Finance Minister Nirmala Sitharaman announced changes in the tax slabs of the new regime of income tax in the Union Budget on July 23. Its purpose is to give relief to taxpayers and encourage taxpayers to use this regime. The Finance Minister also announced to increase the standard deduction in the new regime. He also said that now the interest of taxpayers is increasing in the new regime of income tax. More taxpayers are using the new regime to file income tax returns. The question is, after the announcement of changes in the new regime in the budget, which regime of income tax is beneficial for you?
Tax rates in the new regime
In the new income tax regime, there is no tax on income up to Rs 3 lakh per annum. 5% tax will have to be paid on income from Rs 3 to 7 lakh, 10% on income from Rs 7 to 10 lakh, 15% on income from Rs 10 to 12 lakh, 20% on income from Rs 12 to 15 lakh and 30% on income above Rs 15 lakh. Apart from this, people whose annual income is up to Rs 7 lakh can claim a rebate of up to Rs 25,000 under section 87A.
No change in the old regime in the budget
The Finance Minister did not make any change in the old regime of income tax. In the old regime, there is no tax on annual income up to Rs 2.5 lakh. There is a 5% tax on income from Rs 2.5 to 5 lakh. There is a 20 percent tax on income between Rs 5 lakh and Rs 10 lakh and a 30 percent tax on income above Rs 10 lakh. In the old tax system, taxpayers with an annual income of up to Rs 5 lakh can claim a rebate of Rs 12,500 under section 87A.
Which is better for you?
Which is better for you between the old regime and the new regime? The answer to this question varies from taxpayer to taxpayer. BankBazaar CEO Adil Shetty said that after the changes in the new tax regime in the budget, it no longer makes sense to stay in the old tax regime. Even though deductions and exemptions are available in the old regime, the income tax rates are very high. In the old regime, a lot of deductions are necessary to reduce tax liability.
The new regime is beneficial for those who do not claim deductions
If a taxpayer’s income is Rs 15.6 lakh, then to pay tax equal to the tax rate of the new tax regime, he will have to claim a deduction of at least Rs 4.84 lakh. Shetty said that the new regime is more beneficial for people with low income. In this, taxpayers with annual income up to Rs 7.5 lakh have to pay zero tax. In the old regime, only taxpayers with income up to Rs 5 lakh have zero tax.
