Beginning on April 1, 2020, the Government of India implemented a new tax regime rate (optional) for Hindu undivided families (HUF) and individuals. As a result, Section 115 BAC was added to the Income Tax Act of 1961, which mandated lower tax pay slabs for HUFs and individual taxpayers who did not take certain tax exemptions or deductions.
The administration has proposed significant adjustments to the new income tax structure to give it a boost and make it more appealing to the middle-class common individual. The new tax regime rates include a basic deduction and a full rebate for persons earning up to ₹7 Lakhs per year. Individuals earning more than ₹7 Lakhs per year must therefore choose wisely between the old and new tax pay slabs. As previously stated, the old tax regime allows for deductions and no tax on income up to ₹5 Lakhs.
The government has recognised that the Act contains numerous deductions and exemptions that make compliance by taxpayers and administration of tax laws by tax authorities a time-consuming process. To assist taxpayers, the streamlined new tax rate regime involves the elimination of some tax exemptions and deductions. As a result, it is critical to weigh the impact of claimed exemptions/deductions against the benefit of reduced tax rates.
The income tax brackets have not changed since 2014. While presenting the 2020 budget, Finance Minister Nirmala Sitharaman introduced a new income tax regime. For the current fiscal year, the administration has declared several steps towards a simpler tax regime that will benefit all taxpayers who choose the new tax regime. These changes to the tax brackets will undoubtedly reduce the burden on taxpayers and help individuals to manage their long-term financial goals more efficiently.
Paying taxes is not only a legal requirement but also a civic responsibility that helps the nation's progress and the well-being of its residents. Furthermore, with Fi Money, you can easily track your income and expenses, making it easier to calculate your tax liability. This money management platform will help you Know Your Money & Grow Your Money. Fi's AI-powered Analyser can provide insights to help track your expenses: Analyse your spends by Merchants/Brands, Categories (like Food, Entertainment) & by Time (daily/monthly spends).
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If you have invested more than ₹3 Lakhs in tax-saving plans, the old tax regime is beneficial to you. If you have spent or invested less than ₹3 Lakhs, the new regime will be more beneficial to you.
The new regime would be beneficial for those with higher incomes who do not have numerous deductions and want to take advantage of the reduced tax rates. Subsequently, the decision is influenced by the person's financial situation.