What was the New and Simplified Personal Income Tax Regime Launched Earlier this Year?

On 1st February, 2020 Smt. Nirmala Sitharaman (Finance Minister of India) in the First Annual Budget of this decade announced the Annual Budget 2020-21 which included a lot of changes in the current tax regime to revive our slow economy. We think that this was done to revive the economic slow-down and to battle the investment and consumption-led stress factors.

In our opinion the changes that were proposed aim to stimulate growth, simplify tax structure, bring ease of compliance, and reduce defaults &litigation and thereby provide significant relief to middle class taxpayers. 

Everything about the new regime is very exciting but there is one set back of the new scheme, the tax payers in the new regime would not be allowed to claim around 70 of the existing exemptions and deductions (more than 100) would be removed. 

We have gone through the fine print of the Annual Budget 2020-21 and would like to highlight that the new tax regime is optional and that an individual has the option to continue to either opt the new scheme or pay tax as per the old regime and avail deductions and exemptions. As per the reports, this bold step of the government would cost them estimated revenue forgone of Rs. 40,000 crore per year. 

In addition to the above, measures to pre-fill the income tax return are initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no expert assistance to pay income tax. 

Now in order to reap the full benefit under the new regime, you would now have to calculate tax payable under both the tax regimes, old as well as new. You would have to chalk out your taxable income, deductions and exemptions under the old schemes and see whether it is more than or less than the tax payable under the new regime. If the tax payable under the old regime comes less than that under the new one, please opt for the old scheme only, however if the tax amount under the new scheme is less than that the old one, then go for the new scheme.

Written by- Vishal Tiwari

To know more about the new tax regime please visit source site: https://bit.ly/3aA8eIt