ITR- JUL 24 - SELECT YOUR MORE BENEFICIAL REGIME

FILING ITR- NEW TAX REGIME FY 2023-24 (AY-2024-25)

**HOW IT IMPACTS OUR TAX SAVING INVESTMENTS**

Under the New REGIME revised tax slabs were announced so as to make the NEW REGIME more popular and lesser taxing than the OLD REGIME which stands unchanged for the last many years. This REGIME is applicable for the currrent ITR Filing by 31 Jul 2024 and is the default REGIME as such if one wishes to take Old Regime one needs to select the option while editing your ITR while filing irrespective of the option exercised earlier on SPARSH for the deduction of TDS.

There being thus two options for us for Income Tax Filing.  Which one should we select is the main question in our mind. Our team has researched to resolve this complexity and have found that there can

be no set thumb rule which may be followed universaly. We have to know even if roughly our Tax Liability under both regimes based on your age, Gross Income and applicable deductions under the OLD REGIME to take the final decision, for this we need to calculate tax separately for the two REGIMES . To simplyfy this issue our team has devised here a comparitive "on line tool" to know in one minute as to which Regime should be taken by you based on your data.

While there are no changes in the OLD REGIME on deductions, some deductions have now been allowed under the New Regime as well. Apart from the Standard deduction of Rs 50000/- for the pensioners and  deduction under Sec 57iii i.e Rs 15000 or 1/3 of the basic family pension for family pensioners all other deductions are not applicable for us as defence veterans. 

KNOW YOUR NCOME TAX

FOR FIN YR 2023-24 CORRESPONDING TO AY 2024-25

There are many methods "On line" as well as manual for calculation of the Tax under the two Regimes turn by turn. We are much pleased to present our simple method, devised by our techy team member in the lay man's language for ease of knowing your opetion with least of efforts in five minutes, that too accurately. 

Before we explain the methodology, we need to firstly work out our Gross Total Income from all sources as usual, Secondly jot down our deductions applicable for OLD REGIME as we have been doing till date (help is also available in this post in this regard at the end) and Thirdly the applicable deductioon for REVISED NEW REGIME if you are a salaried employee or a pensioner. as explained above. 

These three items are the only figures you need to know to proceed further as given in succeeding paras. 

CALCULATION WITH OUR ON LINE TOOL

There are number of on line calculators which are availbale on the web for calculations. However we present here our own tool designed by one of our techy manager for your use. It is so simple that it required NO MATH CALCULATIONS by us. It is the only tool which simultaneously give results for both regimes and compare them to for both Regimes.

Please see the colourful window below, there are three green boxes/cells  where some default figures are already there as an example given later in this post. Apart from these three boxes/cells none other is editable and cannot be manuplated,

Please insert the three figures as worked out above in the respective.Green Box by clicking on the box and re-typing your figures, After entering  click any where on the tool, Your results will COME UP.

   NOTE - The default result of More Beneficial REGIME at the bottom right is for Senior Citizen Pensioners as applicable for the OLD REGIME.  As you know there are no specified categories, Sr Ctz etc  of the tax payers under NEW REGIME.

 

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Since the above results are for senior citizen, individuals below 60 yrs should add Rs 2500/- to the basic tax only under old regime and those above 80 Yrs should deduct Rs 10000/- from the basic tax ONLY  under the old regime. 

ALL CHANGES IN THE SLABS AND RATE OF TAX  FOR NEW REGIME AND DEDUCTIONS HAVE BEEN TAKEN INTO ACCOUNT IN THIS TOOL INCL MARGINAL TAX RELIEF UNDER THE NEW REGIME. 

The accuracy of the calculations is 99.9%. 

  Members may also take their decisions on their tax saving investments for the Financial year starting on 01 Apr 2024, based on the results displayed by  the calculator. Since deductions have been done away in NEW REGIME there is no need to invest for tax saving option.

OLD  Vs NEW REGIME - Example as default in ON LINE TOOL ABOVE

 

  Let us suppose that for the Fin Yr 2023-24 your GROSS  Income from pension etc incl interest from FDs amounting to more than 50K  ,  is Rs 13.5 Lakh and you had contributed to PPF Rs150000/- during FY 2023-24. Your deductions under OLD REGIME will add up to Rs 250000/-. 

  OLD REGIME -  Your (Sr ctz between the age of 60 to 80 yrs) tax before Cess under old regime will be Rs 140000/- .  if you are under 60 yrs of age add Rs 2500/-   to this basic  tax amount   and if you are above 80 yrs deduct Rs 10000 from this amount of tax).   

   NEW REGIME  - On deducting the Std Deduction from Gross income  the tax on Rs 13 lakh will be  just 110000/- only.

   Here then the New Regime is more beneficial by 30000/- for  Sr Citizen. This difference will remain even if the Gross Income is more than 13.5 lakh or above 15 Lakh. 

MANUAL CALCULATIONS - STEPS TO FOLLOW:-

STEP-ONE - Note down your total gross income that includes your pension, rent income and income fronm other sources. 

STEP-TWO  - Note down your appliable deductions both under the Old Regime (Applicable as hither to fore) as well as the New Tax regime (Std Deduction for salaried/Pensioners and for family pensioners 1/3rd of basic pension or Rs 15000/- which ever is less).                   

STEP- THREE - Now calculate your Taxable Income by deducting the above deductions from the gross income. Note the same under both the regimes separately.   

NOTE- If your Total Taxable income is less than Rs 5 Lakh inder old regime or less than Rs 7 Lakh under New regime the tax payable will be ZERO due to rebate under Sec 87A

STEP -FOUR - Calculate and note down your pur applicable basic Income Tax under new regime based on the Taxable Income for the new regime as mentioned above using the slabs as under :-

NOTE - If the taxable income was less then Rs 7,77,779/-apply marginal tax rebate as explained below to get the actual tax liability.

STEP- FIVE -  Similarly calculate and note down your payable basic income tax under the old regime based on the taxable income as calculated above using the tax slabs (There is no change to the slabs of previous years under old regime) as given below :-

 

 STEP- SIX -   Compare your tax liability under bothe the regimes and take the one which is more beneficial. 

Note -  under most cases if your deductions are less the Rs 250000/- under the old regime the Bew Regime is likely to be more beneficial.

            The Income Tax dept site has a tax calculator available which can also be used to confirm your manual calculations.

CALCULATIONS BY GOING THROUGH QUESTION ANSWERS SESSION AS PER FLOW CHARTS.

The next method shown here to calculate your income tax liability is by question answeres. 

FLOW CHART FOR NEW REGIME

Please follow the questions and answers as per the flow chart after working out your Final Taxable Income i.e after deducting all the entitled deductions separately for New and the Old regimes.

No Tax is charged if the income is up to 7 Lakhs for all. In case the income is marginally above Rs 7 Lakh marginal Tax rebate is applicable under Sec 87A as amended.

The chart placed opposite is for the New Regime and can be enlarged by clicking on it as per your convenience..

FLOW CHART FOR OLD REGIME

Here again follow the questions and your answers as fiven in the flow chart placed opposite. 

When you reach the final answer just make one multiplication and you will get the Tax liability under the Old Regime. 

The flow chart can be Zoomed  by clicking over it.  

The taxes calcilated are for individuals below 60 yrs of age. here the Sr Ctz should deduct Rs 1250 and Super Sr Ctz Rs 12500 from the amt of tax so calculated.

 The marginal rebate as in New regime is not applicable here.

  

Old Regime vis-à-vis New Regime as approved by Finance Act, 2023 from Income Tax India

Finance Minister Nirmala Sitharaman has in Budget 2023 announced slew of changes in income tax slabs under the new tax regime. The key changes announced on February 1,2023, are:

Changes in the income tax slabs under the new tax regime

Standard deduction introduced for salaried individuals, pensioners under the new tax regime

* Basic exemption limit hiked to Rs 3 lakh from Rs 2.5 lakh under the new tax regime

* Highest surcharge rate reduced to 25% from 37% under the new tax regime

* Rebate under Section 87A increased to taxable income of Rs 7 lakh under the new tax regime only* from Rs 5 lakh under the old scheme. This means that individuals having taxable incomes up to Rs 7 lakh and opting for the new tax regime will not pay any tax since the rebate of Rs 25000/- is applied under Sec 87A. In addition to this Marginal Relief is also applicable if the taxable income is slightly more than Rs 7 Lakhs. 

                     Marginal Tax .Relief - Without going into definition please folllow this example . Suppose the Taxable income works out to rs 720000/- the tax calculated as per slabs will be Rs 27000/-.  It means that you pay Rs 27K for an additional income of Rs 20K ie much more than the exceded income. The marginal tax relief will be applicable in this case as such one will not pay  Rs27000/- , but on application of the marginal relief one will pay only Rs 27000/-  MINUS 20000/- i.e the amount by which one exceeds Rs 7 Lakh equal to  Rs 7000/- only . 

      Here one gets a rebate of Rs 20000/- and pay only Rs 7000/- rather than Rs 27000/-. 

      The breakeven amount is approximately Rs 7,77,779/- beyond which one pays tax as calculated.

 *There is, however, no change to rebate under the old tax regime  upto Rs 5 Lakhs as the limit for No Income tax (REBATE UNDER SEC 87(A)).  Marginal Relief is not applicable under old Regime.     

 

     For those veterans who have been migrated to SPARSH they can report these investments to PDA (PCDA(P)) and their choice of the Old or New Regime on line by logging into their SPARSH account. However they still have a choice while filing the ITR to select the more beneficial Regime Old or New.

Just for your info here are the income tax slabs for earkier year i.e FY 2022-23 that you may need to calculate your Taxes while filing revised income tax return the financial year ended on 31 March 2023.

     

Income tax slabs under pre-revised  new tax regime for FY 2022-23 (LAST ASS YEAR)

OLD TAX REGIME - TAX SLABS - FYs 2022-23-24

Edn Cess is applicable at 4% on the income tax payable for FY 2022-23-24. Further, surcharge will be applicable on taxable incomes above Rs 50 lakh. A rebate under Section 87A was available in both tax regimes for taxable incomes up to Rs 5 lakh for FY 2022-23 which has been evised only for the New Tax regime for the current year to 7 Lakh.

DEDUCTIONS PERMITTED OR NOT-PERMITTED UNDER REGINMES FINANCIAL YEAR 2023-24.

Allowances which are allowed as exempted under both regimes.

1. Any allowance granted for meeting the cost of travel on tour or transfer;
2. Any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;
3. Any allowance granted for meeting the expenditure incurred on conveyance in the performance of duties of an office or employment of profit if the free conveyance is not provided by the employer; and
4. Transport allowance granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with a disability of lower extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty.
5. Deductions allowed under Secs. 80CCH(2), 80CCD(2), 80JJAA, family pension deduction under section 57(iia)

Following Deductions are not allowed under the New Regime. 

1. Exemption with respect to travel concession or assistance as covered in section 10(5);
2. HRA exemption as covered in section 10(13A);
3. Any other allowance as covered in section 10(14) or section 10(17);
4. Entertainment allowance and professional tax as covered in section 16(ii) and section 16(iii) respectively

Comparitive Income tax slabs (In Rs)

For Individual/ HUF/ AOP/ BOI/ Artificial Juridical Person (AJP) 
as per section 115BAC proposed by Finance Bill, 2023

TAX CALCULATOR OF THE I-TAX DEPT:-  The Income Tax Department has brought out a detailed Tax Calculator for us to calculate of tax under Old as well as the New regime as applicable for filing the returns oby 31 Juky 2024. This is available after one logs into one's ITR filing account on https://incometax.gov.in . One must make use of the same.

Take your decision with regard to the Option to be taken by you after you have calculated your tax liability under both the regimes.

INVESTERS -  Old vs new income tax regime for investors: Know which one suits you best

https://economictimes.indiatimes.com/markets/stocks/news/old-vs-new-income-tax-regime-know-which-one-suits-you-best/articleshow/99336601.cms

FOLLOWING DOCUMENTS ARE ASO MADE AVAILABLE FOR REFERENCE  (DRIVE MGR.GRPS)

**  INCOME TAX READY RECKONER 

**  BUDGET SPEECH - FEB 2023

**   NEW INCOME TAX CALCULATOR

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