New Tax Regime vs. Old Tax Regime: Which Is More For You? The 2020 budget has brought a number of changes to our tax system. The most significant change was the introduction of a new tax regime. However, this new tax system was optional. However, many taxpayers were still confused about which system they should follow.
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The Central Government introduced a new personal income tax system for taxpayers in the 2020 budget. This is related to other issues related to the new tax. This suggests that you do not need to choose this tax system by force. You can choose to continue the old method so that you can claim all accessible discounts and rebates associated with tax-saving investments.
So, are you confused between the old tax duties and the new tax discipline? Are you still following the old tax system, and you are still not clear about the new system? Is the newly introduced tax system more beneficial to you?
If you are facing the above problems and are questioning which tax method to choose, you are not the only one. As the tax filing season draws to a close, many salaried employees and self-employed professionals face similar concerns.
To sort out this decision, let’s understand these two methods of taxation.
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Old vs. new income tax regime
The old tax system has different slabs of income for different age groups. It also has separate discount limits for people aged 60 to 80 and people over 80.
In addition, the old system allows you to claim exemptions on your tax-saving investments. See the following tax rates for the old tax rates:
On the other hand, according to the new tax discipline, the new tax rate is the same for all ages. Income slabs are more and more segmented and the new income tax system has seven separate income slabs. See the tax rates below for the new tax regime:
So, you can see that the net income tax duty continuously extends the tax rate from one income slab to another income slab.
Should you continue with the old income tax rules?
The old tariff system has been around for quite some time and you are probably more used to it. However, the solution to whether you choose this method depends largely on the slab on which your income falls and the tax-saving investment in your portfolio.
Since this system includes tax-saving investment discounts, it is advisable to opt for this option if you have a tax-saving investment in your portfolio. By doing this you can claim the full 10,000 rupees. Allow 1.5 lakh rebates under Section 80C and reduce your income tax liability.
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Under the old tax system, you can also take a discount of more than Rs 2,000 for NPS investment. 1.5 lakh sanctioned under section 80C You can claim another one thousand rupees 50,000 discount for NPS investment under section 80CCD (1B). The old system also gives you other benefits like HRA discount and discount for home loan interest up to Rs 2 lakh.
If you have a low income and you are able to deduct the deductible from the old tax system, you can take this tax system.
Should you opt for a new income tax regime?
The new tax rate may be lower in some cases. So, depending on your income level, you may be charged at a lower rate under the new tax discipline. For example, your total taxable income is 7,50,000. So according to the old method, your tax rate is 20%. According to the new tax rate, it is only 10%. It shows you that you should choose a new income tax discipline if its rate is lower then your tax liability is maximized
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In addition, since the new tax does not allow for any tax breaks, fewer tax savings can benefit more people from a new tax rate. You can take this tax rate if your income is higher, and your tax liability Law is lower in the new tax system than in the old tax system.
What are some things to keep in mind before choosing a government?
Before choosing between old and new systems, it is helpful to follow a few bits of advice and remember some ideas. Below given tips to help you for choosing the Tax Regime:
Acknowledge your accessible deduction and discounts.
Determine your total taxable income before and after the rebate and assess tax liabilities under the old and new arrangements.
If your responsibilities are the same in both regimes, you can get more benefits from the old system, which allows discounts and discounts.
In addition, consider your long-term goals and strategize your investments appropriately. Remember that only you are choosing a new scheme so it is not fair to avoid investing in tax-saving options.
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