A non-salaried taxpayer has to choose the new regime when filing the tax return. They need not declare or intimate their choice to anyone during the year. However, a non-salaried taxpayer (taxpayers with an income from business or profession) cannot opt-in and opt-out of the new tax regime every year.
That is to say, income generated by a taxpayer in the F.Y. 2020-21 can be taxed as per the new tax regime. Optional: The new income tax regime is optional. The rates of surcharge and cess in the new income tax regime are same as those in the old (existing) regime.
Consider The Slab Rates
The major difference between the old and the new tax regimes is the different slab rates. Individual taxpayers pay income tax based on the slab system they fall under. The tax slab is based on the incomes of individuals. Typically, individuals with a higher income will need to pay more tax.
Important Attributes of the New Tax Regime Under Section 115BAC. The aforesaid new tax regime is applicable from Financial Year 2020-2021. The new income tax regime is optional you may or may not opt for the new tax regime. ... Even Senior Citizens and Senior Super Citizens can opt in for a new tax regime.
The option of new tax regime is available to all individuals and HUFs. This is optional. Under the new tax regime tax is payable at lower slab rates on the income up to Rs. ... If you wish to opt for the new tax regime you have to forgo various tax deductions and exemptions otherwise available under old regime.
Individuals with business income will not be eligible to choose between the two regimes every year. Once they select a new tax regime, they have only once in a lifetime option for switching back to the old regime. Once they switch back to the old regime, they won't be able to choose a new regime anytime in future.
the new regime.
All deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80G, 80GG, 80GGA, 80GGC etc) will not be claimable by those opting for the new tax regime.
For a salary ranging between Rs 20 lakhs and Rs 25 lakhs, the applicable tax rate under the new tax regime would be the highest, that is 30%.
So, if the annual basic salary of the employee is Rs 5 lakh, one can avail a deduction of up to Rs 50,000 if the employer contributes towards employees NPS account. Going forward, if the new tax regime becomes the norm, as an employee making use of Section 80CCD(2) may help them save taxes.
Old regime is more beneficial when person falling into high tac bracket and eligible to claim multiple deduction such as HRA, 80C deduction. Whereas new regime beneficial, if a person do no want to invest and claiming very low or nil deduction.
If an individual has a salary of Rs 8 lakh per annum, and he/she has opted for a new income tax slab regime, then an income tax will be Rs 46,800. It is calculated without any exemptions and deductions. An individual can save Rs 28,600 more as compared to an old tax regime.
Also, individuals with an income bracket between Rs 5-10 lakh with lower deductions claims will benefit from the new regime. In contrast, individuals under a higher income tax bracket above Rs 15 lakh of income per annum can benefit more from the existing regime by making tax-saving investments.
Cash deposits in bank accounts: CBDT has made it mandatory for a bank or a cooperative bank to report cash deposits aggregating to Rs 10 lakh or more during a financial year, in one or more accounts (other than a current account and time deposit) of a person.
Interest generated on a savings bank account is tax-free up to ₹10,000, under section 80TTA of the Income Tax Act. It makes an account with a balance of less than ₹10,000 a tax-free savings account. The additional interest on the savings account will be taxable if the interest earned from these sources exceeds ₹10,000.
10 lakhs will pay the same tax under both the new and old regimes. This means that if you claim deductions and exemptions totaling less than Rs. 1,87,500 in a year, the new tax regime will be more beneficial to your income tax bracket.
Now, you can start your savings by first investing in instruments that offer rebates under Section 80C of the Income Tax Act. You can save up to a maximum of Rs 1.5 lakh by putting your money in investment tools such as EPF, PPF, ELSS, NSC and up to Rs 1.5 lakh annually in the form of tuition fees for two children.
If senior citizen with no interest income, no savings etc. go for new regime. In short, if you already have maximum 80C of 150000, and paying rent/home loan, you stick with old only. If no loan/rent, consider if you have addnl deductions such as med insurance, edu loan, donations etc.
There is no better slab. For those who invest traditionally as in the old regime, the old slab saves more tax. For those who go for riskier investments out of their money than tax saving investments, the new slabs save more tax.
Even if you don't have any home loan(both principal and interest are tax exempted upto a certain limit), education loan and 80CCD, old tax regime is better for middle class taxpayers and they could end up saving upto Rs. 15000/annum.