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Old and New Tax Regimes in India! Which one to Choose?

Old and New Tax Regimes in India! Which one to Choose? By Dr.V.V.L.N. Sastry (www.drvvlnsastry.com) Q: What was the old tax system? The current tax system, known as the "old tax regime," allows taxpayers to claim a range of exemptions and deductions from various Income Tax Act provisions. Although the tax rate is higher, taxpayers can still claim tax breaks on a range of investments and costs. Q: What is the latest tax structure? Introduced in Budget 2020, the new tax system is a simplified tax structure that allows taxpayers to pay less in taxes but forfeits their ability to take use of all available deductions and exemptions. The tax benefits of numerous investments and expenses are eliminated under the new tax regime, which has lower tax rates than the previous one. Q: Does the new tax structure benefit salaried employees more? The decision between the previous and current tax systems is based on personal preferences and financial objectives. In comparison to the previous regime, the new one has lower tax rates but fewer exemptions and deductions. Salaried workers should assess their unique situation and speak with a tax professional to decide which regime is best for them. Q: Can I change from the previous tax regime to the current one? Yes, when filing their taxes each year, taxpayers have the option to choose between the old and new tax regimes. However, you are not eligible to claim any tax benefits under the previous tax regime after choosing to switch to the new one for a year. Also, the tax regime chosen in the prior tax returns carries over to the following years for individuals having income from business and profession. Q: Does the new tax scheme have any restrictions? Indeed, taxpayers are not permitted to claim deductions under sections 80C, 80D, 80E, 80G, and other provisions under the new tax scheme. Additionally, it does away with the tax advantages of maximum exempt allowances, such as leave travel allowances (LTA) and house rent allowances (HRA). Q: Can I deduct expenses under the previous and current tax regimes? No, you are not allowed to deduct expenses for the same fiscal year under both the old and new tax regimes.