Old Tax & New Tax Regime:As per the budget, some amendments were made to the tax slabs for both salaried and non-salaried individuals. Below table highlights the difference between the old & new tax regime:
|Tax Slab||Old Tax Regime||New Tax Regime|
|Up to Rs. 2,50,000||Nil||Nil|
|From Rs. 2,50,000 - 5,00,000||5%||5%|
|From Rs. 5,00,000 - 7,50,000||20%||10%|
|From Rs. 7,50,000 - 10,00,000||20%||15%|
|From Rs. 10,00,000 - 12,50,000||30%||20%|
|From Rs. 12,50,000 - 15,00,000||30%||25%|
|Above Rs. 15,00,000||30%||30%|
For non-salaried individuals, the new tax regime offers more tax savings by not claiming any deductions. Unlike salaried taxpayer where options of HRA exemptions, standard deductions are available, the non-salaried employees cannot avail such facilities.
Note that if individuals want to claim deductions under Section 80C and Section 80D, then one would need to stick to the old tax regime.
Now, let’s understand the income tax slab for the non-salaried individual with the help of an example:
Non- Salaried Individual
|Old Tax Regime||New Tax Regime|
|Gross Income||Rs. 10,00,000|
|Section 80C||Rs. 1,05,000||-|
|Section 80D||Rs. 15,000||-|
|Taxable Income||Rs. 8,35,000||Rs. 10,00,000|
|Tax Payable||Rs. 79,500||Rs. 75,000|
|4% Cess||Rs. 3,180||Rs. 3,000|
|Annual Tax Payable||Rs. 82,680||Rs. 78,000|
If a non-salaried individual earns Rs.10 Lacs in a year and claims deductions of Rs. 15,000 under Section 80D for health insurance and Rs.1.50 lacs tax benefit under Section 80C. As per the old tax regime, he/she would have to pay around Rs. 82,680.
However, if he/she doesn’t claim any deductions under the new tax regime, the person can save Rs.4,680 and would have to pay Rs.78,000. The new tax slab would be beneficial if you’re a non-salaried individual.
Another example where the income of the non-salaried individual is 20 lakhs.
|Old Tax Regime||New Tax Regime|
|Gross Income||Rs. 20,00,000||Rs. 20,00,000|
|Section 80C||Rs. 1,05,000|
|Section 80CCD||Rs. 5,00,000|
|Section 80D||Rs. 25,000|
|Taxable Income||Rs. 17,75,000||Rs. 20,00,000|
|Tax Payable||Rs. 3,45,000||Rs. 3,37,000|
|4% Cess||Rs. 13,800||Rs. 13,500|
|Annual Tax Payable||Rs. 3,58,800||Rs. 3,51,000|
Clearly, we can see that the individual whose income is 20 lakhs has a benefit of Rs.7,800 on new tax regime.
For business income taxpayers, it is essential to note that if the person opts for the new tax regime, he/she can withdraw that option only once and the person will not be eligible to again opt for the new tax slab option. However, if you have decided to follow the new taxation policy, then you should do it before filing IT return for AY 2021-22.
The proposed tax structure seems to bring relief to non-salaried taxpayers. However, if the process is still burdensome, then taxpayers can seek assistance from professionals.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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