Let's learn more about the new tax regime and what the tax liability is for someone who earns less than Rs 5 lakh
09-Nov-2022
For senior citizens in the new scheme, is there any deduction on total income less than Rs 5 lakh? - Mario Dsouza
An optional new tax regime was introduced in the Union Budget, 2020, which came into effect from 1st April 2020, i.e., from the assessment year 2021-22. This new tax regime is a trade-off between lower tax rates without deductions versus higher tax rates with deductions. As an individual, you will have to calculate tax liability under both regimes and decide which tax regime is more beneficial before choosing one. While the new tax rates progress slowly compared to the old regime, many deductions previously available would no longer be available should you choose the new regime.
Deductions not available under the new tax regime
Some of the deductions which are not available under the new tax regime are:
The assessee has the option to choose which tax regime to follow each year and choose the one which is most beneficial. However, there is an exception to having a choice every year. If an assessee has income from business or profession and chooses the new tax regime, then he has to continue under the new regime as long as he has income from business or profession. The choice becomes available again only when he no longer has any income from business or profession.
It can be quite a complex calculation to figure out which tax regime is more beneficial for you. You can use the Value Research tax calculator for your tax calculation purposes.
Tax rebate if your income falls under Rs 5 lakh
Resident individual assessees whose total net income does not exceed Rs 5 lakh can claim a tax rebate under section 87A. The amount of rebate shall be the amount of income tax computed on total income subject to a maximum of Rs 12,500. This means that your tax liability is nil if your total income does not exceed Rs 5 lakh. It is available irrespective of whether you choose the new or old tax regime.
Suggested read: Choosing between the old and new tax slabs
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