Is new tax regime better than old tax regime?

New Delhi: In order to encourage taxpayers to join the new tax regime, the government provided significant relief, ranging from the introduction of new tax slabs to the inclusion of the standard deduction. ET Now report explains all about the new tax regime.

The new tax regime has made changes to the tax slabs and exemptions to make it more attractive to the taxpayers. The tax rebate under Section 87A has been increased to Rs 7 lakh. Under the new system, income up to Rs. 3 lakh is exempt from taxation. Tax rates range from 5% on income up to Rs 3 lakh to Rs 6 lakh, 10% on income from Rs 6 lakh to Rs 9 lakh, and 15% on income from Rs 9 lakh to Rs 12 lakh. Additionally, those earning between Rs 12 lakh and Rs 15 lakh are required to pay 20%. Those earning Rs 15 lakhs or more will be taxed at a rate of 30%.

Furthermore, if you are in the high tax bracket, the surcharge has been reduced from 37% to 25%. This will result in a Rs 52,500 tax savings. The finance minister has proposed to hike the tax exemption on leave encashment on the retirement of non-government salaried employees from Rs 3 lakh to Rs 25 lakh.

Unless specifically requested to use the old tax regime, the new tax regime will be the default choice. One must express their preference openly in order to stay in the old regime. If not mentioned specifically, you will automatically be under the new tax regime.

Going forward, one area where taxpayers should know that there will be no relief is the insurance premium. The government also proposed to cap deduction from capital gains on investment in residential house under sections 54 and 54F to Rs 10 crore.

However, The government on Wednesday declared that converting actual gold to an Electronic Gold Receipt (EGR) or vice versa won't result in any capital gains taxes. This would promote investments in electronic equivalent of gold. Depository gold receipts, or EGRs, are traded on the stock exchanges. In this arrangement, investors purchase gold in a dematerialized form rather than receiving real gold and are instead given gold receipts.

Source: ET Now