1. What is the old tax regime or existing tax regime?
When we talk about the old / existing tax system it means tax on income calculated according to old tax rates. Under this law, various levels of income are taxable according to the slab obtained after considering all deductions under Chapter VIA (such as deductions under Section 80C, 80D, etc.) and other tax benefits such as HRA, LTA and many others. others as permitted by the Income Tax Act 1961. The current government levies taxes on three levels, namely 5% tax on income of Rs 2.5 lakh-Rs 5.00 lakh, 20% income tax between Rs 5 lakh to Rs 10 lakh and Rs -30% of income in excess of Rs 10 lakh. 4% educational leave is subject to the above tax. Click here to check the Income Tax sleb that applies to you as an old rule.
2. What is the new tax regime?
The new tax system allows for lower tax rates while most of the deductions and tax benefits allowed in the old / existing tax system are not allowed. Click here to check out the Income Tax sleb that applies to you in terms of the new tax system. The tax option option must be made before filing a tax return for the relevant financial year. The taxpayer must disclose the state tax exemption by sending a Form 10IE to the Revenue Department before submitting an ITR.
3. Applicability of new tax regime
The new tax system is in effect from FY 2020-21, that is, AY 2021-22. The choice between ‘new tax system’ and ‘old tax regime’ is available for individuals and HUF, which can be selected by completing Form 10IE.
4. How to provide the declaration of choice between both regimes?
If you get paid, your employer may ask you to advertise to choose between the old and new tax systems.
5. Scenario 1. Employer has asked for a declaration to choose the regime
In such cases, you will need to announce the state election by the deadline as permitted by the employer. Your employer will calculate TDS debt according to the plan you have announced. However, if you fail to provide an announcement, the employer will calculate the default TDS debt according to the old tax plan.
6. Scenario 2. Employer has not asked for any declaration
In such cases, the employer will continue to calculate the fixed TDS debt according to the old tax plan. Also, the employer will specify the selected TDS pull system on Form 16 provided for the job. However, in both cases, the employee will have the opportunity to switch to a system other than the one announced by the employer to deduct the TDS fee during the ITR application. Remember to complete the declaration under Form 10IE if you wish to change your tax plan.
7. How to inform the IT department of the selection of the tax regime?
Central Direct Tax Board has issued Form 10IE. Any person or HUF who wishes to pay income tax on the new tax system can contact the Revenue Department by completing Form 10IE. Also, taxpayers must complete Form 10IE if they wish to opt out of the new tax system. Taxpayers must submit Form 10IE before filing a tax return for the relevant testing year
8. Time limit for filing Form 10IE
For people with business income they can submit Form 10IE before the ITR deadline, ie 31st July or another date (if the government extends the deadline)For people with income, they can submit Form 10IE before or during the ITR submission.
9. Contents of Form 10IE
The basic information required to complete the Form 10IE is set out below:
- Person name / HUF
- Verification of whether a person or HUF has income under ‘profit or profits from business and work.
- PAN number
- Date of birth / business installation date
- Type of business / occupation (mandatory if there is a business benefit)
- ‘yes / no’ verification of whether the taxpayer has a unit at IFSC (International
- Financial Service Center) as contemplated in subsection (1A) of section 80LA. Suppose the answer is ‘Yes’, and then the unit details will be provided.
- Details of the previously filed Form 10IE.
10. e-Filing of Form 10IE
- Taxpayers must complete Form 10IE electronically.
- Taxpayers can submit an application through the Department of Revenue website to select a new FY 2020-21 tax plan onwards.
- The form will be completed using a digital signature or Electronic Verification code (EVC). The Revenue Department will continue to inform you of the process for completing and verifying the form.
Frequently Asked Questions
What if I forget to file Form 10IE?
If taxpayers forget to complete Form 10IE before or during the filing of the ITR, the taxpayer will not be permitted to use the new tax authorization rates. The Revenue Department will calculate taxes based on the old / existing tax system.
Can I choose to file my return with a new tax regime if I have opted for the old tax regime for TDS deduction by my employer?
Only leading people can opt out of any rules every year. Also, the taxpayer is free to choose a different system than the one he or she chose to hold TDS with the employer, i.e. the employee can use a different system than the one he / she originally selected while applying the ITR.
Which is better between the old tax regime and the new tax regime?
There is no one rule that will benefit everyone. Both of these kingdoms come with their own advantages and disadvantages. However, we can give you insight into both of these rules:
- The new tax system is expected to greatly benefit taxpayers with tax incomes of up to Rs 15 lakh, and, in the case of higher earners over Rs 15 lakh, the old state will be a better option. .
- Also, since the new income tax system does not allow for any tax benefits or deductions, it usually benefits low-income investors. As the new government provides seven tax revenue units, anyone who pays taxes without seeking tax deduction can benefit by paying lower tax rates under the new tax system.
- That being said, once you have a financial plan in place by investing in tax-saving tools; health and health insurance; to pay for children's tuition; payment of EMIs on education debt; buying a house with a home loan; and so on, the old government to help with the tax evasion and lower tax exemptions.