Which tax regime is better old or new? Check examples income wise
There are lots of confusion about new tax regime. People are not able to decide which one to opt for. Which income tax regime is better old or new? What is difference between old and new regime? How can I save tax on my new tax regime? Old Income Tax Regime Vs New: What Should You Opt in 2022?
The new tax regime is available only to Individuals as well as to an HUF whether you are a resident or a non-resident and it is optional. In case one wishes to avail the benefits of reduced tax slab rates under the new tax regime in place of existing tax slabs, one has to forgo various tax deductions and exemptions available under old tax regime. The slab rate under new tax regime is same for all age groups unlike old tax regime. The new tax regime can be preferred because of low taxes rate which are as follows-
Slab rates of new and old tax regime for Individuals less than 60 years and HUFs
|Income Tax Slab||Old rate||New Rate|
|Upto Rs. 2.5 Lakh||Nil||Nil|
|Rs. 2.5 lakh to Rs. 5 lakh||5%||5%|
|Rs. 5 lakh to Rs. 7.5 lakh||20%||10%|
|Rs. 7.5 lakh to Rs. 10 lakh||20%||15%|
|Rs. 10 lakh to Rs. 12.5 lakh||30%||20%|
|Rs. 12.5 lakh to Rs. 15 lakh||30%||25%|
|Rs 15 lakh and above||30%||30%|
Lets understand the comparison of New Tax Regime and old tax regime with examples.
Case 1 : Annual Income is upto Rs 7.5 lakh
Case 2 : Annual Income is upto Rs 10 lakh
Case 3 : Annual Income is upto Rs 12.5 lakh
Case 4 : Annual Income is upto Rs 15 lakh
Deductions under New Tax Regime
As far as salaried are concerned they are not entitled to avail major benefits like Standard Deduction, House Rent Allowance, Leave Travel Assistance etc. in case they opt for the new tax regime. The retired senior citizen will not be able to claim standard deduction in respect of pension from ex employer as well as deduction in respect of interest from post office and banks u/s 80TTB if you opt for new tax regime.
Moreover various deductions under Chapter VIA like under Section 80 C (comprised of various items like EPF, LIP, School Fee, PPF, NSC, ELSS, home loan repayment etc.), 80 CCD(1) & 80 CCD(1B) (for NPS) 80D (for health insurance premiums) 80 D for mediclaim, 80 G for donations, 80TTA for interest on saving bank account etc. will also not be available to the taxpayers.
In case you have borrowed money for buying a house or for repairs of the house which you claim to be self-occupied, you are not eligible to the benefit of deduction for interest paid which is available upto Rs. 2 lakhs every year. You will also not be able to set off the current loss as well as brought forward loss under the head house property against current income if you opt for new scheme. Not only that you are not allowed to carry forward any losses in respect of house property for let out properties.
Which Regime is better New or Old?
As many exemptions and deduction can be claimed and since composition of these tax benefits vary from person to person, a readymade answer cannot be given as to which scheme works for you. However, looking at the tax benefits which majority of the taxpayer have to forgo, the benefits available with existing regime outweigh the benefits of lower rates available under the new regime specially in case of salaried people and those who have taken home loan.
How to exercise the option to go for the new scheme?
For those who have salary income, they can opt it while filing ITR. Please note opting for the new tax regime with your employer is not treated as exercising the option under the income tax laws. The exercise of option with employer is for a limited purpose and you can decide to opt for alternative scheme while filing the ITR. Please ensure to file your ITR by the due date if you wish to opt for new tax regime as the option is not available after expiry of the due date. However, You can switch opt remain in old scheme in one year and in new scheme in the very next year.
For those who have business income have to exercise the option every year by filing Form 10IE along with ITR but by the due date of filing the ITR. i.e. 31st July and option once exercised for a particular year cannot be changed if you wish to file a revised return. So please take into account all the income, exemptions and deduction when opting for the scheme for a particular year.
For those who have business income have to exercise the option once. Such a person can only opt to come out of the new tax regime only once and then is not allowed to go back to new tax regime unless there is no business income for that year. So you need to be very careful while opting for new tax regime in you have business income and have to take into account income composition of not only the relevant years but also of all future years.
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