{"id":7813,"date":"2020-03-04T05:49:21","date_gmt":"2020-03-04T05:49:21","guid":{"rendered":"\/blog\/?p=7813"},"modified":"2020-04-14T06:48:53","modified_gmt":"2020-04-14T06:48:53","slug":"has-the-budget-simplified-the-income-tax-regime-or-complicated-it","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/wealth-services\/has-the-budget-simplified-the-income-tax-regime-or-complicated-it\/","title":{"rendered":"Has the Budget Simplified the Income Tax Regime or Complicated it?"},"content":{"rendered":"\n

Budget 2020 has ushered in an important change in\nterms of income tax\nregimes. This time, there is a new tax regime that will coexist with the old one. The aim is to\nsimplify the income tax\nregime and offer a great deal of flexibility to taxpayers at an individual\nlevel. In that sense, the Budget has ensured that the individual taxpayer gets\na certain amount of control and choice. <\/p>\n\n\n\n

Opinion\nis divided on whether this new income tax regime is simplified or has turned out to be\ncomplicated. <\/p>\n\n\n\n

So, what exactly is the dual\ntax regime?<\/strong><\/p>\n\n\n\n

One\nof them is the existing income tax regime and the other one is the new tax regime. The\nlatter does away with exemptions;\n70 of them will be gone. As part of the new tax slabs, those in the Rs 5 to Rs\n7.5 lakh will need to pay a 10 percent tax as opposed to the old\/existing\nregime wherein they had to pay 20 percent. The other slab that one should take\nnote of is the Rs 10 to 12.5 lakh bracket where the existing tax rate is 30 percent\nwhile the new tax regime reduces that to 20 percent. In the Rs 12.5 to 15 lakh\ncategory, the existing\/old tax regime has a tax rate of 30 percent while the\nnew tax rate stands at 25 percent. The new tax regime, thus, lowers taxes. <\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

(Source: Financial Express*)<\/p>\n\n\n\n

Cases where tax rates are the\nsame<\/strong><\/p>\n\n\n\n

In\nthe above Rs 15 lakh category, both existing and new tax rates are the same at\n30 percent. Also, under Rs. 2.5-lakh category qualifies for an exemption of\nincome tax under both the tax regimes. The Rs 2.5 to 5 lakh bracket is eligible\nfor a 5 percent tax rate under both the existing and new regimes. <\/p>\n\n\n\n

The question of exemptions<\/strong><\/p>\n\n\n\n

If\nyou were to opt for the new regime, as many as 70 exemptions including standard deduction, house\nrent allowance (HRA), leave travel allowance (LTA), medical insurance premium\nand life insurance premium, among others have been removed. If you are someone\nclaiming or wishing to claim these deductions, then the old income tax regime is the\none for you. The new tax\nregime is suited for those with not many investments. You can then opt\nfor the new scheme. <\/p>\n\n\n\n

The\nexisting\/older tax regime, which offers a wide range of tax benefits in the\nform of exemptions,\nincentivizes savings.  <\/p>\n\n\n\n

Simplification in the new tax regime<\/strong><\/p>\n\n\n\n

The\nelement of tax simplification is inherent in the new income tax regime. You don\u2019t have to bother\nabout complicated filing procedures. It saves you hassles and also lowers or\nremoves the possibilities of errors in filing. In that sense, the Budget has indeed\nsimplified the tax regime. The absence of exemptions such as LTA and HRA makes\ntax filing more streamlined and straightforward.<\/p>\n\n\n\n

The\nidea of offering taxpayers to switch to one of the two schemes every year lends\nflexibility and greater choice, which is also an advantage. <\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

The complicated element<\/strong><\/p>\n\n\n\n

The\nsimplified new tax regime\nonly comes into play after an individual decides on which tax regime to pick.\nBut to arrive at that decision, an individual taxpayer may have to make\ncalculations, check his\/her investment profile, and then take a call. The\ncomplication lies in the decision-making; ie, which tax regime to pick for a\nyear. The average taxpayer may need professional help to arrive at the\ndecision. <\/p>\n\n\n\n

Key takeaways<\/strong><\/p>\n\n\n\n

In\nconclusion, the system of dual tax regimes announced in the Budget is both simple and\ncomplicated at the same time. The simplicity lies in the ease of the new tax\nregime filing process and the idea of flexibility and choice for the individual\ntax-payer. A tax-payer will have to choose one of them for a specific\nassessment year and can switch to the older regime in the next year or\nvice-versa, depending on what is more advantageous. This puts the control in\nthe hands of the individual. The complexity may lie in the fact that the individual\nhas to compute what\u2019s the best option and then choose one of the two regimes. <\/p>\n\n\n\n

If you are looking to take home loans or opt for life insurance, you may have to understand the differences in terms of tax benefits under the two regimes. Explore Tata Capital home loans or insurance schemes and decide which IT tax regime you want to pick for this year, based on the financial product of your choice.<\/p>\n\n\n\n

Know More<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

Budget 2020 has ushered in an important change in terms of income tax regimes. This time, there is a new tax regime that will coexist with the old one. <\/p>\n

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