New Delhi: Ever since Finance Minister Nirmala Sitharaman announced the new tax regime in her Union Budget 2020 speech, taxpayers have become curious about whether switching to the new regime will help them save more tax. Note that in the new tax regime, there are no exemptions or deductions which means that a person has to forego all deductions/exemptions to make the switch and this has made people wonder whether switching really will benefit them at all.
In order to help taxpayers make an informed decision, the income tax department has an e-calculator on its e-filing website which can help people compare their tax under the old and new regime. The new tax regime has lower income tax rates but without any income tax exemptions and deductions. For the next financial year 2020-21 (the assessment year 2021-2122), the new tax regime will be available as an option.
Assuming your income and the quantum of deductions stay the same, you can use the e-calculator on the Income Tax e-filing website to find out if the new regime is better or the existing regime suits.
If you confused whether to switch to new regime or not, here’s a step-by-step tutorial to compare tax under both regimes using e-filing website tax calculator:
The e-filing website tax calculator comes with the following disclaimer:
1. This calculator is only meant to provide a basic idea of the estimated impact of the new provisions. For the actual provisions and eligibility, one has to refer to the Income Tax Provisions.
2. All tax calculations (includes cess) are excluding Surcharge & Total Eligible Exemptions / Deductions are assumed to be Zero in New Regime.
3. Estimated Annual Income is not applicable for any Income with special rates.
4. Deductions and Exemptions are eligible as per Old regime.
It is worth mentioning that before making a comparison and taking a call in regards to your savings, make sure you have a proper financial plan in place.