Income Tax: New or Old Regime

[puns]

So I have been researching into this as I have to opt for one for my current work place.
Most online examples are for individuals who have HRA benefit and investments or a family situation where other components like loans, kids education etc. come into play.

If someone stays in an owned house (no HRA benifit), has minimum investments like health insurance only and no other insurance and 1 FD, interest from savings account etc. whats the better ?
I calculated using the calculator on ITR website and seems new regime works better but just want to be sure if I am on the right track.

Income and Tax Calculator

www.incometaxindia.gov.in

What's the best suggestion for regime to choose ?

 

[enthusiast29]

Even if you have like PPF account, PF and NPS, you can save tax on upto 2 lac using 80C (1.5L + 50K for NPS).

As for HRA, if the house you live in is in your father/mother's name then you can make a rent agreement and transfer the rent amount monthly to claim HRA benefit. Cannot be done if it's in the name of your spouse. Your landlord (parent) would have to show this as a source of income in their ITR if you transfer more than 1 lac per year as rent and you have to furnish copy of PAN card to your employer to claim the benefit.
If the income of your father/mother is less than the minimum taxable income even after they get the "rent" from you they don't have to pay any tax on it. Ghar ka paisa ghar mei rahega.

Even if you don't opt for HRA (you should though) you still would pay less tax in old regime if you claim 80C benefit.
New regime is best for a person who doesn't wanna do any investments and savings. They won't have to worry about tax computations but will pay the maximum tax applicable on the salary slab.

 

[superczar]

So I have been researching into this as I have to opt for one for my current work place.
Most online examples are for individuals who have HRA benefit and investments or a family situation where other components like loans, kids education etc. come into play.

If someone stays in an owned house (no HRA benifit), has minimum investments like health insurance only and no other insurance and 1 FD, interest from savings account etc. whats the better ?
I calculated using the calculator on ITR website and seems new regime works better but just want to be sure if I am on the right track.

Income and Tax Calculator

www.incometaxindia.gov.in

What's the best suggestion for regime to choose ?

The new regime is for the most part useless.
As mentioned by @enthusiast29 , it’s good only for yolo kids who have no intent to save or optimise their earnings.

My only worry is that sooner or later they may simply eliminate the existing tax regime

 

[puns]

Even if you have like PPF account, PF and NPS, you can save tax on upto 2 lac using 80C (1.5L + 50K for NPS).

As for HRA, if the house you live in is in your father/mother's name then you can make a rent agreement and transfer the rent amount monthly to claim HRA benefit. Cannot be done if it's in the name of your spouse. Your landlord (parent) would have to show this as a source of income in their ITR if you transfer more than 1 lac per year as rent and you have to furnish copy of PAN card to your employer to claim the benefit.
If the income of your father/mother is less than the minimum taxable income even after they get the "rent" from you they don't have to pay any tax on it. Ghar ka paisa ghar mei rahega.

Even if you don't opt for HRA (you should though) you still would pay less tax in old regime if you claim 80C benefit.
New regime is best for a person who doesn't wanna do any investments and savings. They won't have to worry about tax computations but will pay the maximum tax applicable on the salary slab.

thanks, house is in my name so I cant claim HRA,
does that make any difference overall

Also, there are some flexi benifits like mobile, internet, food coupon that I can opt for or not opt for.
Do these have any impact in final calculation in old or new regime and is it better to take flexi benfit by submitting monthly bills. My understanding is if I opt for flexi benifit and sumbit bills, these are non taxable and I will get them in full whereas I dont opt for flexi benifit, company will tax the final amount and give me the say 70 or 80% of it , is this correct ?

The new regime is for the most part useless.
As mentioned by @enthusiast29 , it’s good only for yolo kids who have no intent to save or optimise their earnings.

My only worry is that sooner or later they may simply eliminate the existing tax regime

you are saying they will eliminate the old regime ?
I am sort of yolo kid who doesnt have too many investment, just the bare minimum of medical insurance, saving account. no lic, ppf etc.
Seems like more sense to go for new regime. damn confused.

 

[nitin_g3]

In addition to what @enthusiast29 said. You can also save tax under section 80D if you have a medical insurance for you and/or your parents.
And if you also do charity, then that can also be claimed as tax free under section 80G.

My 2 cents on old vs new tax regime: there are plethora of ways one can save on tax if they go with old tax regime, but almost no way to save tax in new tax regime (there'll be a fixed amount of tax which you'll have to pay based on your annual income, no way to save tax).

 

[enthusiast29]

thanks, house is in my name so I cant claim HRA,
does that make any difference overall

Also, there are some flexi benifits like mobile, internet, food coupon that I can opt for or not opt for.
Do these have any impact in final calculation in old or new regime and is it better to take flexi benfit by submitting monthly bills. My understanding is if I opt for flexi benifit and sumbit bills, these are non taxable and I will get them in full whereas I dont opt for flexi benifit, company will tax the final amount and give me the say 70 or 80% of it , is this correct ?


you are saying they will eliminate the old regime ?
I am sort of yolo kid who doesnt have too many investment, just the bare minimum of medical insurance, saving account. no lic, ppf etc.
Seems like more sense to go for new regime. damn confused.

the felxi benefits saves tax on that part of income, so yeah if you claim that in your company that income will not be part of your salary and hence will be non-taxable.
Even if you claim 80C with a decent amount the old regimw will work for you better. There are many calculators online I think you can experiment what works for you best.

I don't think old regime is going nowhere that is absurd statement tbh. The government encourages to save and invest that's why they allow tax rebate in these sections. It's only for the people who don't invest/save at all the new regime exists so that they pay little less tax in % (but it's more than old regime in most cases when actual amount is computed) on all the income they get.

 

[belictony]

Old regime would get removed over the next 5-10 years. Government is not able to validate the claims/ deduction sought in the income tax return with data. They have started with the annual information statement to get direct information from insurance providers, mutual fund providers to get coorborate what we claim vs what these proividers report.

New regime is beneficial only for income upto a certain limit and no investments. Once you get into the 30% slab, old tax regime with more deductions are somewhat better for tax savings. My tax to income ratio is 13% though i cross the 30% slab.

I don't think old regime is going nowhere that is absurd statement tbh. The government encourages to save and invest that's why they allow tax rebate in these sections. It's only for the people who don't invest/save at all the new regime exists so that they pay little less tax in % (but it's more than old regime in most cases when actual amount is computed) on all the income they get.

encouraging savings and investment is not the primary agend for the government. They want people to spend so the economy goes forward instead of becoming stagnant.

You can hear our finance minister say in one of the tamil news channel interview that their long term plan is to remove old tax regime. As mentioned in my earlier post in this thread, the income tax department is not able to verify the deductions or claims in the income tax returns of the assessees. There are a huge number of individual tax payers and being a CA myself, i have seen lot of clients, claiming deductions like donations to political party, insurance premium payments, etc. without actually paying them. This causes a lot of tax leakage for the government as income tax could not validate this information.

FYI - IT does assessments for individual assessees but only on a sample basis.

 

[enthusiast29]

Well if old tax regime is going to be discontinued then at least as long as it's there one should save tax IMO if it's more savings in old than new.

 

[frozenscotch]

thanks, house is in my name so I cant claim HRA,
does that make any difference overall

Also, there are some flexi benifits like mobile, internet, food coupon that I can opt for or not opt for.
Do these have any impact in final calculation in old or new regime and is it better to take flexi benfit by submitting monthly bills. My understanding is if I opt for flexi benifit and sumbit bills, these are non taxable and I will get them in full whereas I dont opt for flexi benifit, company will tax the final amount and give me the say 70 or 80% of it , is this correct ?


you are saying they will eliminate the old regime ?
I am sort of yolo kid who doesnt have too many investment, just the bare minimum of medical insurance, saving account. no lic, ppf etc.
Seems like more sense to go for new regime. damn confused.

if you fall in 20% or 30%, old regime save good money
if your parents have their own home in the city of ur work, you can claim HRA
yes, flexi benefits are there to save your tax out-go, and yes, your assumption is correct

even though you are yolo kid, its good to save for your future and retirement unless u inherited good amount of wealth. living and health related expenses will cost you a lot.

New regime is beneficial only for income upto a certain limit and no investments. Once you get into the 30% slab, old tax regime with more deductions are somewhat better for tax savings. My tax to income ratio is 13% though i cross the 30% slab.

and being a CA myself, i have seen lot of clients, claiming deductions like donations to political party, insurance premium payments, etc. without actually paying them. This causes a lot of tax leakage for the government as income tax could not validate this information.

whats income ratio, can you pls explain with simple example
donations to political party can be anonymous too and parties dont need to furnish details about donations to IT dept.. how that can be cross verified ?
for a salaried employee, how the tax out-go can be saved apart from usual 80C and D ? being CA, can you give ur inputs/ideas

 

[superczar]

Old regime would get removed over the next 5-10 years. Government is not able to validate the claims/ deduction sought in the income tax return with data. They have started with the annual information statement to get direct information from insurance providers, mutual fund providers to get coorborate what we claim vs what these proividers report.

New regime is beneficial only for income upto a certain limit and no investments. Once you get into the 30% slab, old tax regime with more deductions are somewhat better for tax savings. My tax to income ratio is 13% though i cross the 30% slab.

encouraging savings and investment is not the primary agend for the government. They want people to spend so the economy goes forward instead of becoming stagnant.

You can hear our finance minister say in one of the tamil news channel interview that their long term plan is to remove old tax regime. As mentioned in my earlier post in this thread, the income tax department is not able to verify the deductions or claims in the income tax returns of the assessees. There are a huge number of individual tax payers and being a CA myself, i have seen lot of clients, claiming deductions like donations to political party, insurance premium payments, etc. without actually paying them. This causes a lot of tax leakage for the government as income tax could not validate this information.

FYI - IT does assessments for individual assessees but only on a sample basis.

I don't want this discussion to go into a political tangent - but as a CA, don't you think far more avenues for leakage got added to businesses via GST regime?
That too when they already had multiple avenues to save taxes?

Why not focus on fixing leakages of one's own creation first before squeezing existing (and genuine) avenues for salaried folks further?

 

[TinTinSnowy]

This government have brain-washed people so much that they will be happy paying 50% taxes in name of "Nation Building".

 

[belictony]

whats income ratio, can you pls explain with simple example
donations to political party can be anonymous too and parties dont need to furnish details about donations to IT dept.. how that can be cross verified ?
for a salaried employee, how the tax out-go can be saved apart from usual 80C and D ? being CA, can you give ur inputs/ideas

Tax to income ratio means the amount of tax paid to the total income. Ex. For a employee with 20 Lacs salary, if he pays 2 Lacs as income tax, his/ her tax to income ratio is 2/20 i.e 10%.

apart from 80C and 80D, other cases are individual specific and only those specific individuals can claim.

Ex. 80E - Interest on higher education loan - Interest paid for loan taken for degree, etc. can be claimed as deduction.
80G - if you donate to a religious or chartiable institution or political party, it can be claimed as deduction
80DDB and 80U - deduction for disabled persons meeting certain conditions,etc.
There is also 80EEB where you can claim interest on loan taken for eletric vehicles upto 1.5 lacs.

80C and 80D are the dections used by many as Life insurance and medical insurance payment is prevalent for employed persons. Keep in mind the above deductions and you can plan your next car to be an EV or when you donate, you can donate to a 80G certificate holding chartiable institution and get a receipt for it. There are much more scenario specific deductions apart from the above. I just quoted the ones which are common.

I don't want this discussion to go into a political tangent - but as a CA, don't you think far more avenues for leakage got added to businesses via GST regime?
That too when they already had multiple avenues to save taxes?

Why not focus on fixing leakages of one's own creation first before squeezing existing (and genuine) avenues for salaried folks further?

We really cant question or make changes to the government's focus without continuous media attention, criticism from people and opposition parties, etc. There would be loopholes in any law and will be circumvented.

In case of employed tax payers, a significant portion of our income is already taxed with tight control through Tax Deduction at source. So central is very much happy about it. The only area where the controls lapse, is on the deductions availed when filing the Income tax return. Rather than focusing on big fishes, they have started implementing a long term plan to remove these deductions considering all employed tax payers as one big fish .

 

[frozenscotch]

Tax to income ratio means the amount of tax paid to the total income. Ex. For a employee with 20 Lacs salary, if he pays 2 Lacs as income tax, his/ her tax to income ratio is 2/20 i.e 10%.

There are much more scenario specific deductions apart from the above. I just quoted the ones which are common.

Thanks.. Are you referring to Gross or Taxable income ?

Apart from common one's, can you DM me other ideas (if you think that doesn't come under this thread's purvue)

 

[babhishek]

So I have been researching into this as I have to opt for one for my current work place.
Most online examples are for individuals who have HRA benefit and investments or a family situation where other components like loans, kids education etc. come into play.

If someone stays in an owned house (no HRA benifit), has minimum investments like health insurance only and no other insurance and 1 FD, interest from savings account etc. whats the better ?
I calculated using the calculator on ITR website and seems new regime works better but just want to be sure if I am on the right track.

Income and Tax Calculator

www.incometaxindia.gov.in

What's the best suggestion for regime to choose ?

you dont opt for one at your work place, you choose while filing taxes.
for your usecase new regime.

 

[enthusiast29]

you dont opt for one at your work place, you choose while filing taxes.
for your usecase new regime.

You do opt at workplace too for monthly TDS deduction from salary. If you don't then you pay maximum TDS monthly as per income tax slab.

What you're talking about is applicable to businesses/self-employed people.

 

[nRiTeCh]

So I have been researching into this as I have to opt for one for my current work place.
Most online examples are for individuals who have HRA benefit and investments or a family situation where other components like loans, kids education etc. come into play.

If someone stays in an owned house (no HRA benifit), has minimum investments like health insurance only and no other insurance and 1 FD, interest from savings account etc. whats the better ?
I calculated using the calculator on ITR website and seems new regime works better but just want to be sure if I am on the right track.

Income and Tax Calculator

www.incometaxindia.gov.in

What's the best suggestion for regime to choose ?

Old regime! New one sucks at everything unless you are single with no savings and investments in mind..
Luckily our co. gives us the option every year to choose between these two..

 

[puns]

Had a word with a bunch of people and new regime definitely benifits my case. For most cases, old regime is better if there are lot of headers of investments, family expenses like education, insurances, loan etc.
If one does not have these, new one saves more taxes.
Also, if there are perks at a workplace like mobile, internet, food reimbursements... take those and you end up saving quite a bit on tax benifits as well. only challenge is to submit monthly bills.

you dont opt for one at your work place, you choose while filing taxes.
for your usecase new regime.

You do opt at workplace too for monthly TDS deduction from salary. If you don't then you pay maximum TDS monthly as per income tax slab.

What you're talking about is applicable to businesses/self-employed people.

correct. we have to submit at workplace. everything is obviouslly subjective to actual declerations so this is just for locking as best known for the financial year

 

[enthusiast29]

Had a word with a bunch of people and new regime definitely benifits my case. For most cases, old regime is better if there are lot of headers of investments, family expenses like education, insurances, loan etc.
If one does not have these, new one saves more taxes.
Also, if there are perks at a workplace like mobile, internet, food reimbursements... take those and you end up saving quite a bit on tax benifits as well. only challenge is to submit monthly bills.

I hope you actually do the calculations and then take decision based on outcome and not just a general idea.

I only declare 80C with NPS (2 Lac, full) and HRA (but that's not 100%, so some amount is taxable). I take 2200 per month on SODEXO card (meal pass) and Internet bills 1000 per month with that I save a decent chunk on tax compared to new regime.

You're right for now it's just declarations, you'll need to submit proofs in Jan 2023 and based on those your TDS might be adjusted for last 3 months of the financial year.

 

[puns]

I hope you actually do the calculations and then take decision based on outcome and not just a general idea.

I only declare 80C with NPS (2 Lac, full) and HRA (but that's not 100%, so some amount is taxable). I take 2200 per month on SODEXO card (meal pass) and Internet bills 1000 per month with that I save a decent chunk on tax compared to new regime.

You're right for now it's just declarations, you'll need to submit proofs in Jan 2023 and based on those your TDS might be adjusted for last 3 months of the financial year.

yes i used ITR tax calculator and one that my company also gave, an excel.

 

[raksrules]

@puns and Others

I too feel new regime is better for me. Reason being...

• I am in 30% slab rate.
• The only deductions I can claim are 1.5L for 80C (I don't invest in NPS) and 80D for medical insurance for my family.
• No HRA but flat is not in my name so I could potentially claim HRA by paying rent to my dad but I don't. Not sure how much impact this will have if I started doing so.

Apart from this, I don't have any home loan so no deduction there.

I would love to hear if anyone thinks I can get somehow more benefit with old regime.