OLD v/s NEW TAX 

In India, income tax is a mandatory tax levied on individuals, Hindu Undivided Families (HUFs), companies, firms, and other entities that earn income. The government of India has introduced two income tax schemes for taxpayers, namely the old tax scheme and the new tax scheme. In this blog, we will discuss both schemes in detail.

Old Tax Scheme:

The old tax scheme, also known as the existing tax regime, is the traditional method of calculating and paying taxes. Under this scheme, the taxpayer can claim several tax deductions and exemptions available under various sections of the Income Tax Act, 1961. For instance, deductions are allowed for investments in specified instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity-Linked Savings Scheme (ELSS). These deductions help to lower the taxable income of the taxpayer and, in turn, reduce the amount of tax payable.

However, the old tax scheme has higher tax rates compared to the new tax scheme, making it more expensive for taxpayers. The tax rates under the old scheme for the financial year 2021-22 are as follows:

• For individuals below the age of 60 years:

Income Tax rate Up to Rs. 2.5 lakhs Nil Rs. 2.5 lakhs to Rs. 5 lakhs 5% Rs. 5 lakhs to Rs. 7.5 lakhs 10% Rs. 7.5 lakhs to Rs. 10 lakhs 15% Rs. 10 lakhs to Rs. 12.5 lakhs 20% Rs. 12.5 lakhs to Rs. 15 lakhs 25% Above Rs. 15 lakhs 30%

• For senior citizens (between the age of 60 and 80 years):

Income Tax rate Up to Rs. 3 lakhs Nil Rs. 3 lakhs to Rs. 5 lakhs 5% Rs. 5 lakhs to Rs. 10 lakhs 20% Above Rs. 10 lakhs 30%

• For super senior citizens (above the age of 80 years):

Income Tax rate Up to Rs. 5 lakhs Nil Rs. 5 lakhs to Rs. 10 lakhs 20% Above Rs. 10 lakhs 30%

New Tax Scheme:

The new tax scheme was introduced in the Union Budget 2020 and is also known as the optional tax regime. This scheme offers lower tax rates but does not allow taxpayers to claim any deductions and exemptions available under the old tax scheme. Under this scheme, the taxpayer has to pay tax on their total income without any deductions or exemptions. The tax rates under the new scheme for the financial year 2021-22 are as follows:

Income Tax rate Up to Rs. 2.5 lakhs Nil Rs. 2.5 lakhs to Rs. 5 lakhs 5% Rs. 5 lakhs to Rs. 7.5 lakhs 10% Rs. 7.5 lakhs to Rs. 10 lakhs 15% Rs. 10 lakhs to Rs. 12.5 lakhs 20% Rs. 12.5 lakhs to Rs. 15 lakhs 25% Above Rs. 15 lakhs 30%

Which scheme to choose?

Let us help you to decide which scheme to chose which is most beneficial to you...

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