In an online chat with Rediff.com readers, personal finance expert Anil Rego answered queries about the new tax regime announced in the Union Budget.
The unedited chat transcript:
Bishwajeet Bose: Will like to know senior citizen exemptions in old and new IT rules.
Anil Rego: As of now coinages has been mentioned for senior citizen in the new budget. Old tax slabs and deductions continue. You can either avail old or new.
Rajan Sha: Hi Anil, I want to know the impact of new tax rates on my tax outgo. I belong to the Rs 10 lakh and above tax slab as per the old structure and I use all the tax deductions available to me?
Anil Rego: If you are availing all possible tax deductions including deduction on home loan upto 2 lakh then we suggest using older tax slab.
If there is no home loan interest and you are claiming all other deductions then also you can continue with the old tax rates.
New tax rates can be beneficial only if you are not claiming any of the deductions.
Umar Khan: Why should there be two different tax rates? I am confused. Please help. Shall I stay with the old tax rates if my salary is between Rs 7.5 and 10 lakh?
Anil Rego: New tax rates are optional to assess. Government has given option to either save or invest in the hands of people.
You can choose old or new which is beneficial to you. Since you are a person who avail all deductions you can continue in the old tax rates.
Venkatesh: Very good afternoon saar, Why no new law on LTCG?
I want to sell my house and use the proceeds to buy a new house? Has the LTCG clause changed? How much tax will I have to pay if I buy the new house after say two years after sale of my existing house?
Anil Rego: FM has not proposed any changes on LTCG. If you are planning to sell now you need to acquire new property within 2 years to avail LTCG or you should construct house within 3 years.
If your property is sold in Long Term (2 years), then this benefit is available.
Sumeet salgaonkar: Sumeet Salgaonkar from Pune here Sir. Considering all the different tax brackets and corresponding tax rates will one be better off by moving to the tax rate with no exemption?
Or is this case by case basis? If yes, then who benefits the most by the new rates and who benefits the most by old rates?
Anil Rego: Hi, this is case by case. A person who is not availing any deductions now and who wishes to spend rather than invest will benefit from the new tax rates.
While, a person who avails all tax deductions or partially and wish to invest can continue with old tax rates as this will be more beneficial for them. Before filing carefully evaluate which is more beneficial as per your salary structure.
debadutta dashpanda: Currently the employer contribution to PF (12 per cent of basic) is exempted from taxable salary under 80C. What will happen to this PF component in new tax regime? Will EPF be still considered as an exemption in new tax regime?
Anil Rego: Hi, as per the new tax rates, whatever deductions under 80C cannot be availed if you are choosing new tax regime. This won't affect your investments. As per FM, there can be few deductions in new tax regime, we are waiting for clarity.
Currently 80C cannot be claimed in new tax regime, it is applicable only for old tax rates.
subramanya rao: Which of these exemptions one has to forego in new tax regime? Sec 80 C, 80D, standard deduction, medical insurance paid premium, Standard deduction on rental income (and provision for repairs of house), donation to charities, deduction on interest income in savings bank or FDs? Please clarify.
Anil Rego: Hi Rao, as of now it is been communicated that there won't be any deductions available for new tax regime, but they might allow few deductions. But majority of chapter VI A deductions are not available (70 deductions are removed).
Asmitaa Bade: What about NPS 50k? Also if Interest on Housing Loan not available as deduction, how construction business grow?
Anil Rego: Hi Asmitaa, Government is giving option to tax payers to choose between spending and investing. It is in the hands of individuals to choose either of one. In the new tax regime people won't be able to claim majority of tax exemptions. But in the old tax slab you can still avail all applicable deductions and exemptions.
Jaiprakash Vyas: Whether I would be able to switch between both tax regimes as per my choice more than one time?
Anil Rego: HI Jaiprakash, as per the budget 2020-2021 you are allowed to choose either old regime or new regime. Further we need to wait for the upcoming clarifications.
BHASKAR DE: Will the interest earned from PPF and GPF, and the bonus from LIC be taxable under new tax regime?
Anil Rego: Hi Bhaskar, as per the new budget there is no change is the interest earned from PPF and PF.no change for maturity income from life insurance.
shibaji chatterjee: My ctc is 25 lakh. I invest 150000 in PPF, 120000 is LIC premium and 25000 is mediclaim premium. Also I pay a rent of Rs 25500 in Mumbai. Which slab should I go for?
Anil Rego: Hi Shibaji, as per the given details old tax slab is beneficial for you. We suggest to carefully evaluate which option is beneficial after consulting with a tax planner and avail the same.
JagjitSingh Chawla: Hi Anil, I wanted to check what difference is there for the ESOP and Long term capital Gain in this budget?
Anil Rego: Hi Jagjit, as per the new tax regime there is no change in LTCG for ESOPs in Budget 2020, defers tax payment on ESOPs for employees to 5 years or when they exit, whichever is earlier.
sachin mohite: sir i have 1.5 lakh CPF, 2 Lakh Home loan Interest, 0.75 benefit against Physically Handicap, 0.5 Lakh standard deduction also HRA around 0.75 Lakh which one option i follow?
Anil Rego: Hi Sachin, you have not specified you current gross taxable income. But taking into consideration that you are availing most of the deductions we suggest you to continue with old tax regime. Still, we will suggest to carefully evaluate the option that is beneficial for you.
Vijayasankar: Hi, My CTC will be between 25-28 lakh per annum depending upon my annual bonus. Which one will be better option for me, i.e. earlier tax slab or revised one? I don't have a home loan but i can use 80CC for 1.5 lac abd HRA of 30000 per month.
Anil Rego: Hi Vijaya Sankar, you need to carefully evaluate before deciding which option is beneficial for you. As per our calculations old tax regime can be more beneficial if you are availing all deductions, but we suggest a detailed analysis.
Pruthvipalsinh Jadeja: I am salaried person and doing job as an engineer. No idea about this all economics. So, my question is new tax slab is good move by government? I want your view please.
Anil Rego: Hi Pruthvipalsinh, this is a good move as tax payers will be able to make the choice depending on their financial situation. Government has given option to switch to new tax structure. People can decide whether to invest or spend as per their requirement. A person who is already claiming all deduction can continue to do file old tax regime or can opt for new one as per convenience.
Tejinder: Hi Anil, Few basic questions: This option of new vs. old regime would be one time choice or I have freedom to can switch between both at any upcoming year of returns? From your remarks it looks like you are advocating more to stay with old regime? What are the demerits to move in to new tax slabs? Thanks and regards
Anil Rego: Hi Tejinder, as per the Union Budget 2020-21, you have option to switch to new tax structure; we cannot conclude that same can be availed in the coming years. This may change in the upcoming budget. But this financial year we have the freedom to choose. We only recommend people who are availing most deductions and exemptions to stay with old regime.