Being an earning individual, you are required to pay taxes to the government on an annual basis. The income tax that you have to pay depends upon which tax slab does your income fall into. You can simply check the tax rate of the income tax slab in which your income value belongs.
Income tax slabs of both regimes
A taxpayer gets to choose from two tax regimes when they are filing their taxes. They can either pay through the pre-existing one (also known as the old tax regime) or the new tax regime. The tax slabs of both regimes are different, and you can choose whichever regime you want as per your comfort. Knowing about the different tax slabs of both the regimes will help you make a better choice regarding which one to choose while filing your ITR (Income Tax Return).
|Different Income Tax Slabs|
|Tax rates of old (existing) tax regime for FY 21-22||Tax rates of new tax regime for FY 21-22|
|Resident individuals and HUF of age less than 60 years||Resident individuals and HUF between 60 to 80 years of age||Resident individuals and HUF who are 80 years of age and above||Applicable for all individuals and HUF|
|0 – 2,50,000||NIL||NIL||NIL||NIL|
|2,50,000 – 3,00,000||5% (tax rebate available u/s 87)||NIL||NIL||5% (tax rebate available u/s 87)|
|3,00,000 – 5,00,000||5% (tax rebate available u/s 87)||NIL|
|5,00,000 – 7,50,000||20%||20%||20%||10%|
|7,50,000 – 10,00,000||20%||20%||20%||15%|
|10,00,000 – 12,50,000||30%||30%||30%||20%|
|12,50,000 – 15,00,000||30%||30%||30%||25%|
|Income above 15,00,000||30%||30%||30%||30%|
Once you understand the different income tax slabs of both the regimes, you will notice that the new tax regime does have lower taxes than the existing tax regime. There is no clear best choice here and it depends upon what you as a taxpayer find convenient. You can use an income tax calculator and find the taxes payable through both regimes. Then you can simply opt for the one where you will be paying lower taxes.
Which regime should you choose?
When you compare both the regimes, you will find that the new tax regime is much more simplified and easy to opt for while filing ITR. With the new tax regime, a taxpayer cannot claim any deductions or exemptions. This is the reason behind having low tax rates in some slabs when compared to old tax regime. When you choose old (previous) tax regime, you can avail for deductions and exemptions.
You have to pay your taxes depending on the income tax slab your income falls under. If you have investments and other products that offer tax exemptions or deductions, you can simply use the old tax regime. However, if you do not have any such tax instruments or their benefits are negligible, you can directly opt for the new tax regime. Ensure that when you are using an income tax calculator, you take your deductions and exemptions into consideration. There are about 70 types of tax deductions and tax exemptions that you can claim if you choose the old tax regime. With the new tax regime, the deductions and exemptions have been eliminated, but the taxes have been lowered as well. Filing the taxes through the new tax regime is quite simple, since you have to see in which slab your income belongs, and simply pay accordingly.
There are several factors that you need to take into consideration while choosing the income tax regime. The income tax slab applicable to you, your income, the composition of income, savings, liabilities, and investments, are some key factors to consider while filing taxes. You can file your taxes online or even take the help of a financial advisor, if there are several components to it. Ensure that you file your taxes on time to avoid any last-minute hassles.
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