Bhubaneswar: Even as the Union Budget 2020 offered taxpayers the option to choose between the existing income tax regime and a new system, the dual income tax system seems to have created confusion for individuals.
Experts opined that though Finance Minister Nirmala Sitharaman has brought new lower personal income tax regime and introduced two options for taxpayers, old tax regime is a better option for salaried employees.
For example if an individual’s annual income is Rs 7 lakh and availing important tax breaks like Section 80C, Section 80D and standard deductions, he/she will not have to pay any tax under the current tax structure.
However, if the taxpayer is opting for the new tax regime, he/she will have to pay Rs 32,500 as tax as it has close to zero exemptions. In this context, the old tax structure will benefit the taxpayer while it will be loss if he/she chooses the new system.
Stating that the old structure is good for salaried employees, experts advised them to calculate tax under both the regime to see which is more beneficial.
Chartered accountant SK Sabat said, “Before choosing any tax regime, one should calculate thoroughly what will be the tax if he or she is availing all benefits under the old regime and what will be the tax amount if he/she opts for new tax slab. After proper calculation, one should choose between old and new tax structure.”
Meanwhile, questions are being raised whether the Finance Minister has made the tax structure even more complex in an attempt to make it simplified.
Chartered Accountant Bijay Sahu views, “I feel that the various slabs introduced in the tax structure will make the process complex instead of making it simple. The new tax regime will prove to be a loss for those who had been availing deductions in interests and other benefits while those who were not availing any benefits will get some minimal benefits.”
Finance Minister Nirmala Sitharaman in her budget speech had said that the new tax slab will be beneficial for taxpayers and given some examples. However, she did not specify whether the new regime will benefit those who are availing various deductions or those who are not availing it.
According to the announcement of the FM, if the deductions are withdrawn in coming days, the salaried employees whose income is upto Rs 7 lakh and not paying tax will suffer loss.
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