PremiumNEW DELHI : Finance Minister Nirmala Sitharaman's Budget announcement of allowing taxpayers to choose between two income tax regimes, based on the deductions and exemptions they claim, has left several taxpayers confused. The old income tax regime gives you the benefit of a 100-odd exemptions while the new regime makes you forego around 70 exemptions in exchange for a lower tax slab. While filing of income tax returns (ITR) you will be asked to choose any one of the tax regimes. But how do you decide which one suits you?
There is no simple and universally applicable formula as to which regime can help taxpayers save taxes. Some taxpayers, particularly those who do not make investment or expenses under Section 80C like PPF, insurance, tuition fees, tax saving mutual funds, etc will benefit from the new regime while others should continue with the existing framework.
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Premium Premium You can plan your investment, savings and even expenses once you understand which tax regime you fit into. To make a choice between the two income tax regimes, all you need is a good tax calculator.
To solve this problem, the income tax department has launched a new e-calculator on the e-filing portal. You can access the income tax calculator 2020 here.
The income tax calculator for resident individuals for FY 2020-21 asks your age group (below 60, in between 60-79 years and those above 79 years), estimated annual income and exemptions, deductions that you want to claim as per the old regime.
Based on your inputs, the I-T department will tell you tax payable under both the frameworks. For example, if your estimated annual income is ₹10 lakh and you are not claiming any exemptions/deductions, you will have to shell out a tax of ₹11,700 under the old regime and ₹78,000 under the new regime. Therefore, the tax benefit under the new regime is ₹39,000. But the situation reverses if you claim tax benefit of ₹2 lakh. In such a scenario, you will end up paying ₹2,600 extra tax under the new regime.
The calculator is meant only to provide a basic idea of the estimated impact of the new Budget provision. Revenue Secretary Ajay Bhushan Pandey said, "we don't want people to go to chartered accountants or income tax officers or anyone else. Taxpayers can just visit the website and understand which tax regime is better for them."
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