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%
An education cess of 4% is applicable across all tax slabs under the new regime 

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  
Deductions
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 
Deductions
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.

Click here to visit our personalised online advisor that gives you the financial expertise you need.

DISCLAIMER

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.



Trending Articles

Article Links

How to Calculate Income Tax

Income Tax Benefit

Tax Saving Investment

Tax Saving Investments Under 80C

What is Tax

Latest Articles

abc-of-taxes
abc-of-taxes

Income Tax Slab for Senior Citizen: Rates and Exemptions

Read More
Posted on 24 March 2020
abc-of-taxes
abc-of-taxes

How to Get Tax Rebate in India?

Read More
Posted on 24 March 2020
abc-of-taxes
abc-of-taxes

Section 80D Of The Income Tax Act For Health Insurance

Read More
Posted on 24 March 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image abc-of-personal-money
abc-of-personal-money

Is Any Dream Too Big If It Is Born Out of Passion and Ambition?

Read More
Posted on 30 March 2020
image abc-of-personal-money
abc-of-personal-money

Free Access to some Amazing Content Online

Read More
Posted on 30 March 2020
image abc-of-personal-money
abc-of-personal-money

Free Access to Online Music

Read More
Posted on 30 March 2020