Two tax regimes will now exist concurrently following the Spending plan 2021 gave taxpayers a selection. There is the aged one, which arrives with bigger tax prices (at quite a few ranges of revenue) but also delivers a host of exemptions and deductions. And there is the new routine introduced by the finance minister, where by the prices will be reduce for lots of men and women, but taxpayers will not be capable to avail of any deductions or exemptions.
Industry experts say the tax routine has now turn into pretty taxpayer-certain. Each and every taxpayer will have to research his/her certain situation at the start of the fiscal yr and then make your mind up no matter whether to decide for the new or the aged routine.
For lots of, it may perhaps be advantageous to adhere to the aged routine. “Our evaluation exhibits that men and women who ended up maximising all the tax added benefits that are on offer you will advantage by being in the aged routine. These kinds of men and women ought to not decide for the new routine,” states Archit Gupta, founder and chief govt officer, ClearTax.
A host of exemptions and deductions are readily available to taxpayers. Salaried staff can avail of household lease allowance (HRA) and leave travel allowance (LTA). Individuals who have taken a house mortgage can avail of a deduction of up to Rs 2 lakh on the fascination part of their EMI, and also on the principal part (below Segment 80C).
A deduction of up to Rs 1.5 lakh is readily available below Segment 80C. The deduction on well being insurance coverage high quality paid out every yr readily available below Segment 80D can increase as high as Rs seventy five,000 — up to Rs 25,000 on the high quality you shell out for your nuclear family, and up to Rs fifty,000 on your moms and dads if they are senior citizens.
One more deduction of up to Rs fifty,000 is readily available on the National Pension Program (NPS) below Segment 80CCD (1B). Several extra these kinds of added benefits are readily available.
One particular component that will complicate calculations even further regarding which routine to decide for is the absence of ceiling on some deductions. “The deduction on education mortgage below Segment 80E is one where by there is no upper restrict,” states Gupta.
The taxpayer can declare deduction on any sum of fascination revenue that he/she repays in a fiscal yr. For those people who have taken a major education mortgage, say, to fund a child’s foreign education, it may perhaps make sense to adhere to the aged routine.
Though the new tax routine is less complicated, the determination no matter whether to decide for it is not. “Check which exemptions and deductions you are qualified for. Then do the calculations on no matter whether your tax liability will be reduce in the new routine or the aged one,” states Naveen Wadhwa, DGM, Taxmann.com.
He delivers a couple ballpark figures. “If your revenue is less than Rs 8.5 lakh and you only declare Segment 80C deduction, then really do not go for the new routine. On the other hand, if your revenue is extra than Rs 8.5 lakh, and you have only been claiming Segment 80C deduction, it may perhaps make sense to decide for the new routine,” he states.