The Union Budget 2020 has simplified taxation for taxpayers by proposing a brand new, “simplified” tax regime. The new tax regime lowers the tax rates for individual taxpayers. However, there’s a condition: they need to forego tax deductions and exemptions to avail the enticing lower rates. Several queries arises during making of choice of previous v/s NEW Tax Regime.
Here we have discussed few FAQs that would help you while deciding which tax regime you should follow.
1) Can a person change Tax Regime year on year?
- The persons who have Income from sources of Salary, House Property, Capital Gain and from other sources are allowed to select tax regime year on year basis. However, those having Income from Business Profession are allowed to select tax regime only once in lifetime.
2) Is Standard Deduction of Rs. 50000 available under new tax regime to Individuals having Income from Salary?
- The main condition of availing an option of paying tax at concessional rates on Income up to Rs. 15 Lacs is “to forego certain tax deductions and exemptions”. Here Deductions includes Standard deduction which is otherwise available of Rs. 50000 to those having Income from Salary. It means that Standard Deduction is not available under new tax regime.
3) Can a person opting New Tax Regime avail benefit of Rebate u/s 87A?
- The new tax regime only talks about foregoing most of the exemptions and deductions, and therefore Rebate u/s 87A is available under both Old as well as New Tax Regime.
4) If Employee does not give Intimation of going for new tax regime to the employer while deciding tax liability and later on wish to go for new regime while filing Income Tax Return, can he do so?
- The CBDT via circular dtd. 13th April has clarified that an Employee can change the tax structure at the time of filing income tax and that the amount of TDS will be adjusted accordingly.
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