[ad_1]
The assessee can choose between the new tax regime and the old tax regime, depending on what is most appropriate from the point of view of tax planning.
Income Tax Rates Under New Tax Regime Vs Old Tax Regime
| Income Slab (Rs.) | Tax rate (old system) | Rate of Tax (New regime – devoid of exemptions and deductions) |
|---|---|---|
| 2.5 lakhs. till | Zero | Zero |
| 2.5-5 lakhs | 5% | 5% |
| 5-7.5 lakh | 20% | 10% |
| 7.5-10 lakh | 20% | 15% |
| 10-12.5 lakhs | 30% | 20% |
| 12.5-15 lakhs | 30% | 25% |
| above 15 lakhs | 30% | 30% |
Note: The above rates are subject to surcharge and cess as applicable.
Which plan is better ( new vs old)
The new tax regime has proposed lower income tax rates for the income group up to Rs 15 lakh. But the proposed lower tax rates will apply only if we are willing to forgo available exemptions and deductions.
This means that when we opt for the new tax regime, we have to forego certain exemptions such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), etc.]and deductions available under Chapter VIA of the Act which grant gives.
Deduction only under section 80CCD(2) [i.e., employer’s contribution on account of an employee in a
notified pension scheme] and section 80JJAA [i.e. for new employment]
can be claimed.
Even standard deduction under section 16
[which is currently Rs 50,000] Available to salaried individuals and deduction on home loan interest will not be allowed under section 24(b). About 70 exemptions and deductions have been removed in the new tax regime.
Old regime better option for high income earners
| description | Old tax regime (Rs.) | New Tax Regime (Rs.) |
|---|---|---|
| Gross Income | 1,000,000 | 1,000,000 |
| Deduction: | ||
| U/Sec: 80C | 150,000 | , |
| u/sec: 80d | 25,000 | , |
| u/sec: 24 (b) | 75,000 | , |
| taxable income | 750,000 | 1,000,000 |
| Tax Slabs (Old) | ||
| 0 to 2.5 lakhs | , | , |
| 2.5 to 5 lakh @ 5% | 12,500 | , |
| 5 lakh to 10 lakh @ 20% | 50,000 | , |
| > 10 lakh @ 30% | , | , |
| Tax Slabs (New) | ||
| 0 to 5 lakhs | , | , |
| 2.5 to 5 lakh @ 5% | , | 12,500 |
| 5 to 7.5 lakhs @ 10% | , | 25,000 |
| 7.5 lac to 10 lac @ 15% | , | 37,500 |
| 10 lac to 12.5 lac @ 20% | , | , |
| 12.5 lac to 15 lac @ 25% | , | , |
| >15 lakh @ 30% | , | , |
| Income tax | 62,500 | 75,000 |
| Cess @ 4% | 2,500 | 3,000 |
| total tax expense | 65,000 | 78,000 |
[ad_2]
Source link
