Beneath the policy, those assessees who opted for the newer or another tax regime that is presented in budget 2020 AY 2021-22 the initial time on which they needed to furnish the returns. Towards the concern, the salaried assessee poses an option to switch between the 2 tax regimes during the ITR filing. The current tax regime provides tax advantages and the latest regime that provides less tax cost for people who leave on the advantages of tax deductions towards savings and expenses.
On April 1, 2020, FY 2020-21 an upgraded tax regime has come into action under section 115BAC of the Income Tax Act, 1961. The same does not permit 70 exemptions and deductions like house rent as well as leave travel allowance, education allowance, section 80C, and 80D advantages, and home loan interest deduction beneath Section 24.
From the same procedure issues and hurdles have been drawn to both chartered accountants and employers “Most organisations and their HR departments feel maintaining employees’ records on their choice between the two regimes increases the complexities and paperwork burden,” mentioned by tax expert.
A survey would be carried out towards whether the new tax regime has drawn the attention of the Indians because of the lower tax framework after the extension of the last date for ITR filing.
2021 Conversion Ratio
The newer system for the tax has been opted for by a few portions of their customers said the tax professional. “Two high net-worth individuals (HNIs) out of hundreds of clients have opted for the new tax regime,” a tax expert mentioned.
Lower acceptance is not seen in the national capital but also in the other cities said the tax expert. “Hardly 18-20 cases out of 700-plus clients have opted for the new tax regime. Such tax-payers have picked the new framework as they are not interested in investments and want a low effective tax rate. They simply base their decision on the net tax liability.”
The tax professional service providers of the higher-income people have not found any individual who avails for the new tax regime. A tax expert specified that “Those who claim deductions of at least Rs 2.5 lakh a year have stuck to the old tax regime, in our experience. All our HNI clients fall in this category.”
Who is Going Towards the New Income Tax Regime?
Individuals might not have any idea about the advantages of the new tax regime and also he is not planning for the year in the context of the same regime.
Tax experts said “Instead of planning it in advance, individuals are comparing the two options at the end of the financial year and then selecting the regime based on low tax liability. In some cases, the younger population, which doesn’t save in tax-saving investments, is opting for the new tax regime,”
The Assessee who availed of the new regime has done so to prevent the locking of money under section 80C investments that held with the lock-in period. “They prefer to invest in FDs instead of locking into their investments for 3-5 years in tax saving instruments,” a tax expert commented, the tax service providers whose customers opt for switching to the new regime post-learning their final tax liability beneath these two regimes.
Who Needs the New Income Tax Regime?
In the current tax regime, the lower tax slab of 5% is not available in the higher slabs the advantage is not been there. “The new regime is better suited for lower-income groups, freshers who may wish to avoid paperwork and pensioners,” as per the comment of the tax expert.
Hence what would be the level of income in which the NTR gets best suited? “Freshers or those who earn less than Rs 7.5 lakh could find the new regime beneficial. Those who earn more than Rs 10 lakh have largely chosen to stick to the old regime,” suggested by tax expert.
Read Also: Solved! Confusion Between Old or New Tax Regimes for ITR
In the low tax, no deduction scheme shelter is needed to apply as it has been imposed by the pandemic “Usually, those who have not invested, especially during the COVID-19 period or have recently started earning and need funds instead of locking them in investments are opting for the new tax regime. Those who have a small home loan amount, too, consider the lower tax system,” said by tax expert.
Who Must Not Opt for the New Income Tax Regime
The regime which is best suited is to be chosen and the regime must be opted as per the future aspects specifically when you do not come under salaried individual. Tax expert said that “Self-employed individuals who may want to take a hefty home loan in the future should avoid opting for the new tax regime as the tax deductions of home loan offer tremendous tax-saving opportunities, especially when a couple jointly takes a home loan,”
Only Once in Lifetime to Select Tax Regime
Salaried individuals would choose in between the current and the new regime at the beginning of any year, but on the other side, a self-employed person would make a choice only once throughout their life. “If the option to alter each year is offered to self-employed too, then the new tax regime could gain more traction as these business individuals can’t predict their future income and can actually utilise the facility,” as per the tax expert.
Towards NTR the low awareness and advance planning restrict the same. A load of paperwork for business management teams is another hurdle. The tax expert cited that “One of the reasons why the new system has found limited traction is that companies have not gone all out to create awareness. Organisations allow employees only one opportunity – at the beginning of the financial year – to choose a tax regime for the purpose of computing tax deducted at source (TDS). So, employees have to wait until return-filing to change their choice if they receive bonuses or mid-year hikes and find that their chosen regime is not beneficial,”
Firms and the Central Board of Direct Taxes (CBDT) are working to remove these hurdles then various advantages would be obtained if the new regime gets free from issues. Furnishing the tax return shall be easier beneath this system.
