[Everlearner]

New income tax slabs announced by Nirmala Sitaraman for next year.
Maximum tax reduction of Rs.1,12,500 for people having a taxable income greater than 15 lakhs.

[d.w.w.]

Originally Posted by Everlearner

Maximum tax reduction of Rs.1,12,500 for people having a taxable income greater than 15 lakhs.

There is a flaw in the calculation though. The taxable income in old and new regime cannot be compared. Taxable income in new regime should be taxable income in old income+ deductions.

If you don't have much deductions to claim, the proposed structure looks beneficial.

[jthomas]

Originally Posted by Everlearner

New income tax slabs announced by Nirmala Sitaraman for next year.
Maximum tax reduction of Rs.1,12,500 for people having a taxable income greater than 15 lakhs.

Attachment 2413501

In the old regime, we have

1.5 lakh - 80C exemption
50k - NPS exemption
If housing loan interest and donations are there we can get more exemption. HRA would be also there.

Assuming an average person gets 3 lakh exemption and is in 30% tax bracket, then the new regime tax slabs will bring only 112500 - 30% of 3 lakh = ₹12500

So not really much in new regime for person earning in 30% tax bracket.

[Everlearner]

Originally Posted by d.w.w.

There is a flaw in the calculation though. The taxable income in old and new regime cannot be compared. Taxable income in new regime should be taxable income in old income+ deductions.

If you don't have much deductions to claim, the proposed structure looks beneficial.

Originally Posted by jthomas

In the old regime, we have

1.5 lakh - 80C exemption
50k - NPS exemption
If housing loan interest and donations are there we can get more exemption. HRA would be also there.

Assuming an average person gets 3 lakh exemption and is in 30% tax bracket, then the new regime tax slabs will bring only 112500 - 30% of 3 lakh = ₹12500

So not really much in new regime for person earning in 30% tax bracket.

That's true. I believe the old regime will be completely removed eventually. Personally, I would still prefer the old regime since I have already made all required investments for tax benefits.

[d.w.w.]

Originally Posted by Everlearner

Please note that this is a comparison between last year and this year tax slabs for OLD REGIME ONLY.

The proposed new slabs are applicable only for new regime. There are no changes made to old regime. Looks like the intention is to move more tax payers to new regime and discontinue the old regime later.

[DigitalOne]

The critical change is that the new Tax regime (without exemptions) is going to be the default from FY 23-24 onwards. So if you want the old tax regime (with exemptions), you will have to inform your organization to do TDS deductions appropriately.

[SilentEngine]

Originally Posted by jthomas

In the old regime, we have

1.5 lakh - 80C exemption
50k - NPS exemption
If housing loan interest and donations are there we can get more exemption. HRA would be also there.

Assuming an average person gets 3 lakh exemption and is in 30% tax bracket, then the new regime tax slabs will bring only 112500 - 30% of 3 lakh = ₹12500

So not really much in new regime for person earning in 30% tax bracket.

I see the calculation is little off. Break-even point is now 375,000 in terms of deduction needed in old regime to have same tax as new regime. It used to be 250,000 earlier, so that's a huge jump, and in that context it makes sense that new regime is being made as default from next year onwards.

Getting 375,000 deduction is not that simple if one doesn't have a home loan or HRA. 80C, 80CCD, 80D takes you to 275,000, so you need another 1L to break even.

[SoumenD]

The day this New Regime was introduced it was pretty clear what the government's direction was. Expecting any change in old regime is futile as that will be eventually removed IMO.

Originally Posted by jthomas

In the old regime, we have

1.5 lakh - 80C exemption
50k - NPS exemption
If housing loan interest and donations are there we can get more exemption. HRA would be also there.

Assuming an average person gets 3 lakh exemption and is in 30% tax bracket, then the new regime tax slabs will bring only 112500 - 30% of 3 lakh = ₹12500

So not really much in new regime for person earning in 30% tax bracket.

New Regime has a standard deduction of 50k now. That makes new regime more attractive.

Link

Originally Posted by SilentEngine

Getting 375,000 deduction is not that simple if one doesn't have a home loan or HRA. 80C, 80CCD, 80D takes you to 275,000, so you need another 1L to break even.

Even I get this feel now. I just closed my HL this year and since I stay in my own flat, no HRA even. Only deductions I have is 1.5L 80C, 50k NPS, 75k Insurance(Senior Citizen-50k+Others-25k) making it 2.75L and LTA around 40-50k once in 2 years. Either way I don't see my exemption reaching 375000 legally.

Will consult a tax consultant but on first look, looks like new regime would be better for me.

[SilentEngine]

Originally Posted by SoumenD

Will consult a tax consultant but on first look, looks like new regime would be better for me.

Ultimately it comes down to how much deductions one can make. I used new regime for last two years already, my taxability was on borderline break-even point.

Only thing that's not clear now is once we use new regime, is there a way to go back to old regime each year or not (which is possible now). I hope that doesn't go away.

[BaCkSeAtDrIVeR]

How is LTCG treated under the new regime? Do we continue to enjoy the ₹1 lakh exemption limit on LTCG from shares in which STT is paid?

[DigitalOne]

Originally Posted by BaCkSeAtDrIVeR

How is LTCG treated under the new regime?

There is no change to capital gains tax structure or rates. "New Regime" refers to income tax (without exemptions) rates.

[d.w.w.]

Originally Posted by SilentEngine

Getting 375,000 deduction is not that simple if one doesn't have a home loan or HRA. 80C, 80CCD, 80D takes you to 275,000, so you need another 1L to break even.

Exactly. I claim HRA (home loan already closed) and after calculating the tax in both regimes the difference is <10K. Not sure if it is worth going with the old regime since it creates lot of complexity and paperwork while filing investment proof/returns.

If you pay HRA + home loan (living in one city and owning home in other) or pay home loan on 2 properties, the old regime makes more sense.

Originally Posted by SilentEngine

Only thing that's not clear now is once we use new regime, is there a way to go back to old regime each year or not (which is possible now). I hope that doesn't go away.

This is the most important question. When people relocate for work, they may end up taking a rented home and will need to claim HRA. Same applies to people buying new properties on loan. If the switch is not possible, they will end up paying more tax.

[mtripathi13]

Originally Posted by d.w.w.

This is the most important question. If the switch is not possible, they will end up paying more tax.

Sir, till now if there was no business income involved, one could choose the regime at the time of filing the return. You could change it for each and every year with the return. In case you had business income, the switch was allowed only once. Once switched you could not go back unless and until you no more had business income.

I suppose the same will apply here. More clarity will emerge in the days to come. I will keep the members posted on this query once I get all the fool proof information on this 'changed system' which uses the new regime as default.

Regards
Manish

[d.w.w.]

Originally Posted by mtripathi13

Sir, till now if there was no business income involved, one could choose the regime at the time of filing the return. You could ..........

Thank you! Came across this and it appears inline with what you shared.

[pandey.jai]

Folks is there any recommended (online or offline excel based) tool that I can use to calculate my taxes due based on various income and savings parameters?

I’m looking to see for myself which regime I should opt for. I did some back of the envelop calculations but I’d like to verify my calculation too, before deciding where I should be headed.