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    Comparison of Old Vs New Tax Regime (MS)

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    Comparison of Old Vs New Tax Regime (MS)

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    sriharikosa
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    Comparison of Old vs New Tax Regime (MS)

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    5 views11 pages

    Comparison of Old Vs New Tax Regime (MS)

    Uploaded by

    sriharikosa

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 11

    MEGASOFT SOLUTIONS INDIA PVT. LTD.

    GLOBAL LEADERS IN PAYROLL & HRMS SERVICES


    COMPARISON: NEW TAX REGIME vs. OLD TAX REGIME (UNION BUDGET 2020)

    Slide 02
    Income Tax Rates under the New Tax Regime vs. Old Tax Regime

    The budget has proposed a new tax regime in addition to the existing, i.e. old tax regime. The new tax regime is
    optional. To put it simply, the assessee can choose between the new and old regime depending on what is best
    suitable from a tax planning point of view. The tax rates under the old and new regime are as under:

    Tax Rate (New Regime)


    Income Slabs (Rs) Tax Rate (Old Regime) – Devoid of Exemptions &
    Deductions
    Up to 2.5 lakh Nil Nil
    2.5 – 5 lakh 5% 5%
    5 – 7.5 lakh 20% 10%
    7.5 – 10 lakh 20% 15%
    10 – 12.5 lakh 30% 20%
    12.5 – 15 lakh 30% 25%
    Above 15 lakh 30% 30%

    Slide 03
    Note: The above rates are subject to surcharge and cess, as applicable.
    New vs. Old – Which is better?

    The new tax regime has proposed lower income-tax rates, for income segments up to Rs 15 lakh. However, you
    need to remember that the proposed lower tax rates will be applicable only if you are willing to give up exemptions
    and deductions available under various provisions of the Income Tax Act, 1961.

    This means that when you choose the new tax regime, you will have to for-go some exemptions (such as Leave
    Travel Allowance (LTA), House Rent Allowance (HRA) etc.) and deductions available under chapter VI A of the Act
    that grant deductions under Section 80 (such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE, 80G, 80GG,
    80GGA, 80GGC etc.).

    Only the deduction under Section 80CCD(2) (i.e. employer’s contribution on account of an employee in a notified
    pension scheme) and Section 80JJAA (i.e. for new employment) can be claimed.

    Even the Standard Deduction under Section 16 (which is currently Rs 50,000) available to salaried individuals and
    the deduction on home loan interest, under Section 24(b) will be disallowed. Around 70 exemptions and deductions
    have been removed in the new tax regime.

    Slide 04
    Old Regime seems to be a better option for High-Income Earners

    Particulars Old Tax Regime (Rs) New Tax Regime (Rs)

    Gross Income 1,000,000 1,000,000


    Deductions:
    U/Sec: 80C 150,000 -
    U/Sec: 80D 25,000 -
    U/Sec: 24(b) 75,000 -
    Taxable Income 750,000 1,000,000
    Tax Slab (OLD)
    0 to 2.5 Lakh - -
    2.5 to 5 Lakh @ 5% 12,500 -
    5 Lakh to 10 Lakh @ 20% 50,000 -
    > 10 Lakh @ 30% - -

    Slide 05
    Old Regime seems to be a better option for High-Income Earners

    Particulars Old Tax Regime (Rs) New Tax Regime (Rs)

    Tax Slab (NEW)


    0 to 5 Lakh - -
    2.5 to 5 Lakh @ 5% - 12,500
    5 to 7.5 Lakh @ 10% - 25,000
    7.5 Lakh to 10 Lakh @ 15% - 37,500
    10 Lakh to 12.5 Lakh @
    - -
    20%
    12.5 Lakh to 15 Lakh @
    - -
    25%
    > 15 Lakh @ 30% - -
    Income Tax 62,500 75,000
    Cess @ 4% 2,500 3,000

    Slide 06
    Total Tax Outgo 65,000 78,000
    Old Regime seems to be a better option for High-Income Earners

    Going by the above illustration, if the gross income is Rs 10 lakh or above and you are utilizing deductions under
    Section 80C, 80D, and 24(b) of the Income Tax Act, 1961, then you are better off under the older regime; it works in
    your favor from a tax planning standpoint. While for individuals in the middle-income group, earning a gross income
    of say Rs 5 lakh; the new regime may prove advantageous.

    That being said, if you are looking to fulfill your financial obligations, namely - wealth creation through investments in
    tax-saving instruments; paying premiums to address insurance needs (life and health); paying children’s tuition fees;
    paying Equated Monthly Installments (EMIs) of an education loan; buying a house with a home loan; and so on, the
    older regime still works in the interest of your financial wellbeing.

    Note* - The above views are only illustrative and readers are advised to take decisions based on their own assessment only.

    Slide 07
    What goes out in New Tax Regime

    Some of the 70 exemptions and deductions which employees would have to for-go under the new regime are:

    1. Standard deduction: Rs 50,000


    2. House rent allowance: Depends on salary structure and rent paid
    3. Housing loan interest: Rs 3.5 lakh for affordable housing, Rs 2 lakh for others
    4. Investments under Sec 80C: Rs 1.5 lakh
    5. Leave travel allowance: Tax free if claimed once in block of two years
    6. NPS contribution: Rs 50,000
    7. Medical insurance premium: Rs 25,000 (Rs 50,000 for parents and senior citizens)
    8. Savings bank interest: Rs 10,000 under Sec 80TTA
    9. Interest income (for senior citizens): Rs 50,000 under Sec 80TTB
    10. Education loan interest: Interest paid for eight consecutive years
    11. Disability of self or dependent: Rs 75,000 to Rs 1.25 lakh depending on disability
    12. Treatment of self or dependent for specified disease: Rs 40,000 (Rs 1 lakh for senior citizens)
    13. Donations to specified entities: 50-100% of the amount donated

    Note* - The ceiling for total benefits of Employer contribution to PF/SAF/NPS has also been restricted to Rs. 7,50,000 /- in both

    Slide 08
    regimes which would have an effect of increased tax liability in some cases.
    What stays in New Tax Regime

    Some 50 tax exemptions which have been left untouched in the new regime are:

    1. Standard deduction on rent: 30% of the rent received under income from house property.
    2. Agricultural income: No limit
    3. Income from life insurance: If insurance cover is 10 times the annualized premium
    4. Retrenchment compensation: Rs 5 lakh
    5. VRS proceeds: Rs 5 lakh
    6. Leave encashment on retirement: Rs 3 lakh (No limit for govt. workers)

    Slide 09
    Choosing between the two regimes n MS Payroll Portal

    We, at Megasoft, have developed an online TDS calculator which will assist employees to check their TDS amounts
    under both regimes and decide to opt for a regime accordingly. This calculator can be accessed at the time of
    declaring investment as shown below:

    Slide 10
    Note* - This option can only be exercised once in the financial year.

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