The due deadline for filing Income Tax Return (ITR) for the financial year 2020-21 has passed on December 31, 2021. If you have not been able to file the ITR then you can file the belated ITR by the due date 31st March, 2022. After the deadline for filing returns for a financial year is over, the taxpayer has a chance to file the belated ITR.
In the year 2020 budget, two options were provided for filing tax. Old and New Tax Slab. Taxpayers can choose any one of the two tax slabs according to their tax liability. Archit Gupta, Founder and CEO, Clear says that the new tax slab is different from the old slab in two ways. First…it has more slabs with lower rates. Second… by adopting the new system, you will not get the benefit of about 70 types of exemptions and deductions, which are available in the old tax slab.
Which is better…old or new tax slab
Archit Gupta says that taxpayers should calculate the tax liability at the applicable normal rates after taking advantage of all kinds of exemptions and deductions on their income. For example, a salaried person under the old slab can claim exemption of Rs 50,000 for LTA, HRA, standard deduction. In addition, an individual taxpayer can claim deduction of up to Rs 1.5 lakh under section 80C of income tax on housing loan interest and NPS contribution etc. In addition, the taxpayer needs to calculate the tax liability on his earnings as per the new tax slab. By comparing these two, you can choose a better tax slab for yourself.
They will get benefit in the new slab
In the new tax regime, the highest tax is levied on an annual income of Rs 15 lakh and above. This arrangement is beneficial for those taxpayers who claim less exemption and deduction. Those who fall in higher tax slabs and who have made necessary investments to save tax, they will not benefit much from this arrangement. Those who want to adopt the new slab rates, they will have to forgo all the exemptions like standard deduction, 80C, 80D, housing loan, NPS.
New system fine for under 30s
If the age of the taxpayers is less than 30 years, then it would be better for them to choose a new tax slab. But it would be better if people older than this remain in the old system. The new system can be better for people earning less than Rs 10 lakh. For those earning more than this, it would be better to remain in the old system. If the home loan is running, then it would be appropriate to do the home loan repayment. In this case, the benefit of deduction will be available. Those who pay the school fees of the children, it would be better for them to remain in the old system as one can take advantage of tax exemption on fees.
The impact on you under the slab
Earnings/tax regime Old New
Up to Rs 2.5 lakh 00 00
2,50,001 to 5 lakh 5 per cent 5 per cent
5,00,001 to 7.5 lakh 20 per cent 10 per cent
7.5 to 10 lakh, 20 per cent, 15 per cent
10 lakh to 12.5 lakh 30 per cent 20 per cent
12,50,001 to 15 lakh 30 per cent 25 per cent
Above 15 lakh 30 per cent 30 per cent
Keep these things in mind while choosing
A salaried or pensioner, who does not have any income from business, can choose any one in the new or old tax regime every year.
If the source of income is a business, then after choosing the new system, one can return to the old tax regime only once.
Those whose annual income is less than five lakh rupees, then they do not have to pay tax under any system.
In the new system, senior citizens do not get much tax exemption. The exemption limit for all is Rs 2.5 lakh only.