Old Versus New Income Tax Regime: Which isbetter for Your Needs?
Be careful what you wish for, because itmight just come true! This is what exactly has happened to the Indiantaxpayers.
Peoplein India have been demanding a simplified tax regime with liberal and lowerrates for a long time. In Union Budget 2020, Finance Minister NirmalaSitharaman has acceded to the demand, but with a condition. If you want to havea simple tax structure, you will have to go through a lot of exemptions anddeductions.
Thebudget 2020 has given taxpayers the option to choose between the existingincome tax regime and a new tax regime with slashed income tax rates and newincome tax slabs but no tax exemptions and deductions. It is to be noted thatonce you opt the option for a new tax regime, it will remain valid forsubsequent years.
Thenew tax regime provides you lower tax rates and new tax slabs and at the sametime, it removes tax exemptions. During her budget speech, the financeministers claimed that those with INR 15 lakh income will save INR 78,000 intaxes and those with lower incomes will get profit with new lower tax rates.But if you look deeply it may not be completely true.
Thenew tax regime brings 70 deductions and exemptions. It includes standardsdeductions of INR 50,000 available to all salaried individuals without the needto invest and up to INR 1.5 lakh deduction on mandatory contributions to EPF(Employees' Provident Fund) for most salaried people.
Underthe new tax proposal, people with an annual income of up to 2.5 lakh will nothave to pay any tax.
Forincome between 2.5 lakh to 5 lakh, the tax rate will be 5% (as earlier).
Thosewith an income of 5 lakh to 7.5 lakh will have to pay a reduced tax rate of 10percent.