2024-04-09 10:29:44
The new tax regime has been made attractive
In the budget proposal of last year i.e. 2023-24 itself, the Central Government has made the new tax regime a little attractive. Now the tax rebate in this (Tax Rebate in New Tax Regime) has been increased. Now this limit has become Rs 2 lakh. This means that now if a tax payer chooses the new tax regime, he will not have to pay any income tax on annual income up to Rs 7 lakh instead of Rs 5 lakh. Along with this, salaried people will also get the benefit of standard deduction of Rs 50,000 in the new tax regime from this year itself. In this way, those whose total annual income is Rs 7.5 lakh will become tax free by choosing the new tax regime.
what is in the old system
In the old system of income tax i.e. Old Tax Regime, the annual income limit to be exempted from income tax is only Rs 5.50 lakh (Tax Rebate In Old Tax Regime). If a tax payer chooses the old tax system and avails the benefit of deduction under various sections of income tax. And if he brings his taxable income up to Rs 5.50 lakh, his income tax will be zero. There has been no change in the exemption amount of the old tax system in the last several budgets.
Choose old tax regime or new tax regime
Some provisions were made in last year’s budget to make the new tax regime attractive. Union Finance Minister Nirmala Sitharaman had given the gift of standard deduction to make it attractive. Besides, the tax rebate limit was also increased to Rs 2 lakh. As far as the Old Regime was concerned, it was left as it was. In such a situation, the question arises whether the new tax regime is better? Should the old system be said bye bye? There cannot be a general answer to this. Because, under the old tax regime, the amount of investment under various provisions of 80C and Income Tax Act will decide whether the new tax regime is good or old for a particular taxpayer. But it is important to note that the more the provisions of the Income Tax Act that provide tax exemption are used to the maximum extent, the more beneficial the old tax regime will become in comparison to the new tax regime.
If children are studying, if you have also taken a home loan then which is right?
If a salaried person has two children and pays school fees of about Rs 20 thousand every month. So the old tax regime is fine for them. Similarly, if a person has taken a home loan, then the old system is fine for him also. In this arrangement, they will get rebate on both Home Loan Interest Payment and Principal Repayment. Similarly, if a person lives with his old parents and has taken separate health insurance for them, then he will also benefit more under the old system.
If you earn up to Rs 7.5 lakh then which one is better?
If a person earns up to Rs 7.50 lakh in a year and does not invest even a single penny, then the new system is right for him. Such a person will not have to pay even a single penny of income tax in the new tax regime. On the contrary, they will have to invest at least Rs 2 lakh to pay zero tax in the old system. In the current lifestyle of people, it becomes a bit difficult for a person with an annual salary of Rs 7.50 lakh to invest Rs 2 lakh in a year.
Zero tax on income up to Rs 10 lakh in the old system
If a taxpayer chooses the old tax regime, he can save entire tax even on income of Rs 10 lakh in a year. He can avail the benefit of Rs 50 thousand in standard deduction, Rs 1.5 lakh in 80C, tax exemption up to Rs 2 lakh on home loan interest payment or HRA and tax exemption on Rs 50 thousand. Can invest in NPS. He can also save up to Rs 80 thousand on medical insurance for himself and his old parents. In this way his net taxable income will be below Rs 5 lakh.
Slabs of old and new tax regime
Old Tax Regime – (For those below 60 years of age)
0 to 2.5 lakh 0 tax
2,50,001 to 5 lakh – 5 percent
5,00,001 to 10 lakh -20 percent
More than Rs 10,00,001 lakh – 30 percent
New Tax Regime (for people of all ages)
0 to 3 lakhs 0 tax
3 to 6 lakh 5 percent
6,00,001 to 9 lakh – 10 percent
9,00,001 to 12 lakh – 15 percent
12,00,001 to 15 lakh – 20 percent
Rs 15,00,001 lakh or more – 30 percent
New or old tax regime, what to choose?
Even after reading this, if the question of new or old tax regime still remains then you need to meet a tax consultant. However, tax advisor C. Kamlesh Kumar explains that the answer depends on your income, your investment habits and your expenses. If you are used to saving. If you use various tax saving instruments under the Income Tax Act, then the old system is definitely better for you. But if you consider investment or savings as a useless task then it will be good for you to come to the new tax system. The tax rate here is relatively low.