This is the first time when a new tax regime has been initiated. The introduction of a new tax regime leads to confusion in the mind of taxpayers, that which one is suitable for them. When it comes to choosing a thing, in available options, choosing wisely for your benefits is very important. How better it sounds, that you can choose your own tax rates. Tax rates are the ratio which an individual or a company use to be taxed.
“The choice to make good choices is the best choice you can choose.” a quote by Ryan Lilly is well fitted for taxpayers. Many individuals may find it challenging to identify which one of the two regimes is better as per their income. Choosing between the old tax regime with deductions and exemption and the new tax regime without deductions and exemption but with lower slab rates, while filing the ITR is a quite tedious task.
The New Tax Regime
Under section 115BAC, the Budget 2020 introduces a new regime giving an option to taxpayers to pay income tax at lower rates. The new tax regime comprises six tax slabs with prevailing rates reduced on income up to Rs. 15 lakh.
The New Tax Regime; know the slab rates
Income slab | New slab rates |
Income from Rs 2.5 lakh to Rs 5 lakh | 5% |
Income from Rs 5 lakh to Rs 7.5 lakh | 10% |
Income from Rs 7.5 lakh to Rs 10 lakh | 15% |
Income from Rs 10 lakh to Rs 12.5 lakh | 20% |
Income from Rs 12.5 lakh to Rs 15 lakh | 25% |
Income above Rs 15 lakh | 30% |
Various tax rates, multiple exemptions, and deductions are not applicable under New Tax Regime. Taxpayers can analyze the new tax regime’s pros and cons.
The Pros:
The Cons:
The Old Tax Regime
The old tax regime is the existing tax regime according to which all taxpayers earlier use to pay the taxes. The old regimes include 3 tax slabs, for which the pros and cons can be checked below.
The Old Tax Regime; know the slab rates
Income slab | Existing slab rates |
Income from Rs 2.5 lakh to Rs 5 lakh | 5% |
Income from Rs 5 lakh to Rs 10 lakh | 20% |
Income above Rs 10 lakh | 30% |
The Pros:
The Cons:
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