The budget 2020 presented by the Finance Minister brought about one of the most unexpected changes. The taxpayers now have the option to choose between the old and the new tax regime.
Of course, there was going to be a catch. The catch is that whilst opting for the new tax regime, you would be letting go of several notable deductions such as chapter VIA deductions - ELSS investments, medical insurance premiums, etc.
Here is what is covered under the New Tax Regime and what isn’t -
Since the financial year just kicked off, you would have to choose which tax regime you are opting for old or new tax regime. Check out this video to see how both are different.
An individual having salaried income and no business income has the option to choose between the old and new tax regimes every year i.e. he/she can switch regimes from year to year.
However, individuals having business income are not eligible to choose between the new and old tax regime every year. Once they have opted for the new tax regime, they only have a one-time option of switching back to the old tax regime in their lifetime.
Once they switch back, they will not be allowed to opt for new tax regime again.
If you have opted for old tax regime with your employer for TDS on salary, and plan to opt the new tax regime at the time of filing ITR, then you can do that by filling the new form i.e. 10-IE.
Can full-time traders claim expenses like Broker charges STT, GST + other expenses like computer buy for trading, internet connection bill etc under new tax slabs?
If you forget to fill the new form i.e. Form 10-IE, at the time of filing ITR, then you may be disallowed the tax rates available under the new tax regime. The tax department will calculate your income tax liability based on the existing/old tax regime.
These budget changes will be applicable from FY 2020-21. From FY 2020-21 it will be up to the taxpayer to select the tax regime based on their Income and Investments situation.
Following are the pros of following a new tax regime:
The Income Tax Slab Rates are lower,
A simplified Tax Structure i.e, Ease in filing ITR.
Individuals can invest freely according to their financial goals without any compulsion to make an investment to avail deduction.
Following are the cons of following a new tax regime:
Discourages New Home buyers since no benefit will be available on Interest paid on Home Loans.
Salaried individuals who live in rented properties will not be able to claim Exemption on HRA which will increase their tax burden.
No tax benefit under section 80C or 80CCD(1B) upon investment in different tax savings schemes.
Under the new income tax regime, losses from house property can only be set off against other income from house property. Also, house property losses cannot be carried forward under the new income tax regime.
You can set off capital & business/professional losses. However, you cannot carry them forward and set them off against future gains.
Form 10-IE is not yet available for filing on the income tax portal. Income tax department will make it available for filing before the e-filing of income tax returns starts.
Hi, so just to confirm that if I opt for new tax regime, then I can keep filing ITR with the new tax regime for some years let’s say 4-5 years and after that if I wish to choose the old tax regime then that’s it. Only one time switching back to the old tax regime, till then I can file ITR with the new tax regime, right?
I got my form 16 from the employer but I am not sure whether the tax was deducted on the old or new tax regime basis, how to figure this out? Where to find this information?
