Our salary earning friends have to submit the investment declaration form for their selection of Tax regime for the FY 2020-21. Most of our friends are confused about selection of the Tax regime, where on one side the New tax regime seems to be attractive for its less tax rates, on the other hand, the old tax regime has its own benefits like availing several exemptions and deductions. Our friends can have a look at the advantages available under both the regimes, which are given below in short and make a decision about chosing the appropriate regime. Before chosing the regime it must be kept in mind that, TDS on salary is deducted as per the applicable tax slab rates on your income whereas TDS on say interest income from fixed deposits is deducted at only 10%.
One important point to be noted here is that once the choice of tax regime has been communicated to the employer, the employee cannot change the choice of tax regime during the financial year. However, an employee will have the option to switch the tax regime at the time of filing tax return (ITR). But it is made clear over here that If you opt for the new tax regime for the purpose of TDS from salary but switch to old regime when filing ITR, then you may be unable to claim certain tax exemptions, which are otherwise allowed in the old regime such as tax exemption on leave travel allowance.
So while making a comparison it must be kept in mind that where under the new regime, tax structure is simplied, on the other side, an individual may have to loose deductions available under Chapter VI-A and several other deductions available like standard deduction, exemption of HRA, deductions available on interest on House loan in respect of a self occupied house property etc.
Apart from this, for individuals who have business income, deductions such as depreciation, investments in new plant and machinery, tea, coffee, rubber development, specified businesses, agriculture extension projects and scientific research expenditures cannot be availed under the new tax regime.
And incase, you are still not able to select between the two regimes, you may feel free to send us your queries at whatsapp @9877527875 or email at [email protected] .
Sanjeev Kumar Khanna (Financial Mentor)
