Recent changes to tax exemptions and allowances, including increased education, hostel, and HRA limits, have made the old tax regime more competitive against the new regime, prompting salaried employees to re-evaluate their choice for the current financial year.
'If an individual makes significant financial investments, she should stick to the old regime.' 'If the individual prefers straightforward computation without any tax benefits, the new regime would be suitable.'
With Income Tax Act 2025 in force, your tax choice can quietly cost you big money if you're not paying attention. Ramalingam Kalirajan explains how
'Among corporates, about 60% of income is now reported under the new tax regime.'
There are a number of steps taken that will leave more money in the hands of the taxpayers.
These include the reduction in tax rates under the new tax regime, increase in standard deduction, allowing tax collected at source to be adjusted against tax deducted at source from salaries, notes Harsh Roongta.
Ask rediffGURU and tax expert Mihir Tanna your income tax-related questions.
'We have now drastically simplified it, primarily to two rates in long-term capital gains: 20% and the applicable rates. Similarly, in short-term capital gains.' 'For listed shares, there is a slight increase, but for unlisted shares, where indexation benefits are removed, there is a reduction in rates, benefiting unlisted companies, venture capital firms, etc.' 'Similarly, in real estate, wherever returns are higher, the new structure is beneficial. In very few cases, returns are lower, and those are more of an exception.'
Most taxpayers will benefit from being in the old tax regime, assuming they optimise their salary for tax benefits and claim the deductions available to them.
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.
Some individuals opt for the new regime without a comparative analysis of the tax liability under the two regimes.
The old tax regime remains unchanged. 'Taxpayers opting for it will continue to follow the existing slab rates and deductions.'
Your financial goals are of utmost importance and the tax saving is an added incentive, advises Dwaipayan Bose.
Master the online ITR filing process and then learn the differences between the old and new tax regimes to pick your best option.
Review your family emergency fund and replenish it if needed. Revisit financial goals to see if there is any change in timeline or the corpus required.
'If a taxpayer opts for the new tax regime once, he can only switch back to the old tax regime once in his lifetime.'
Most think tax-saving deductions exist only in the old regime. But the New one quietly retains 40+ ways to ease your tax load
The choice of tax regime dictates how your income will be taxed. If you don't make the right pick, you might end up losing money.
rediffGURU Vipul Bhavsar answers readers' personal income tax queries.
Finance Minister Nirmala Sitharaman on Wednesday said the government has made the new income tax regime more attractive for taxpayers and has thus brought about 'substantial changes' in its structure for the benefit of the middle class. The Budget 2023-24 has proposed changes in the optional tax regime, which was introduced in 2020-21. Speaking to reporters after presentation of the Budget, Sitharaman said the country has been waiting for a direct tax regime which is simplified and easy in compliance.
Several changes were made to the new income-tax regime in Budget 2023. The old income-tax regime was not tinkered with and is still available.
More than 8 crore income tax returns for assessment year 2024-25 have been filed this year, of which 74 per cent taxpayers have opted for new tax regime, a source said. Also, around 75 lakh updated ITRs have been filed this year in high garnered additional taxes of Rs 8,000 crore.
'We are not incentivising the old tax scheme. These taxpayers will also shift to the new regime after comparison.'
In the rush to complete tax-saving investments at the end of the financial year, many taxpayers choose instruments that do not match their long-term financial goals.
A key mistake would be continuing to rely on provisions of the Income-Tax Act, 1961, where the new law now applies, and vice versa.
Ask rediffGURU and tax expert Mihir Tanna your income tax-related questions.
'Most young taxpayers prefer income tax filing to be flexible yet straightforward.'
The most common mistake is investing without assessing suitability and long-term implications.
'Nearly 10 million people will benefit from the increase in the rebate limit for those earning up to Rs 12 lakh.' 'We expect all that money will come back into the economy in either savings, consumption, or investments.'
'Going forward, the encouragement would be to move to the new tax regime.'
'The adjustments (of tax slabs and standard deduction) will reduce the tax burden for salaried individuals with an income of around Rs 20 lakh by approximately Rs 18,000.' 'For non-salaried individuals with the same income level, the savings will be around Rs 10,000.'
The new income tax regime for filing returns has been "sweetened" in the Budget 2023-24 and it will be beneficial for maximum number of taxpayers as they can enjoy a "reduced" tax rate, CBDT chairman Nitin Gupta said. Speaking to PTI during a post-Budget interview, Gupta said the intent of the government while announcing the new slabs and rates under the new tax regime is to gradually "do away with deductions and exemptions" so that the "long-standing demand of reduction of taxes for individual taxpayers and entities can be met." Finance Minister Nirmala Sitharaman, while presenting the Budget 2023-24 in the Parliament on Wednesday, said the government has made the new income tax regime more attractive for taxpayers and has thus brought about 'substantial changes' in its structure for the benefit of the middle class.
'I believe the modified scheme is much more beneficial and simpler.'
Ask rediffGURU and tax expert Mihir Tanna your income tax-related questions
rediffGURU Vipul Bhavsar answers readers' personal income tax queries
A taxpayer whose deductions and exemption claims are less than Rs 3.75 lakh annually would be advised to opt for the new income tax regime and pay less tax than they gave in the old regime, a senior finance ministry officer said on Wednesday. The Income Tax Department has arrived at the figure after making due calculations for ensuring a "hassle-free and less tax rate" filing regime for the assessees, he said. Union Finance Minister Nirmala Sitharaman, while presenting the Budget for 2023-24, said the government has made the new income tax regime more attractive for taxpayers bringing "substantial changes" in its structure for the benefit of the middle class.
The government should refrain from raising income tax surcharge on the super-rich and reintroducing wealth tax in the upcoming 2026-27 Budget, as the move could prompt persons in high-income brackets to leave the country for low-tax jurisdictions, according to tax experts.
Young buyers often underestimate future health risks.
After the last Budget's announcement of a major tax relief for those earning an annual salary of less than Rs 12 lakh, there is not much that individuals can look forward to in the forthcoming Budget, points out A K Bhattacharya.
Ask rediffGURU and PF, MF and insurance expert Purshotam Lal your mutual fund, insurance and personal finance-related questions.
This Budget positions India's taxation ideology as not merely a revenue source but as a strategic catalyst for growth, inclusion and long-term confidence.
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