What is New Tax Regime?

Let me explain to you, what is new tax regime? You can choose to pay income tax under an optional new tax regime beginning in FY 2020-21. Individuals and HUFs can benefit from the new tax regime, which has lower tax rates and fewer deductions and exemptions.

Under a new regime implemented in Budget 2020 under section 115 BAC, individuals and HUF taxpayers would be eligible to pay income tax at lower rates. The new system will apply to revenue earned beginning April 1, 2020 (FY 2020-21), which corresponds to the fiscal year 2021-22.

• On salary, there is a standard deduction under Section 80TTA/80TTB, as well as professional tax and entertainment allowance.

• Allowance for Travel While on Leave (LTA)

• HRA (House Rent Allowance)  

• Minor children income allowance

• Allowance for helpers

• allowance for children's education

• Other special considerations [Section 10(14)]

• Interest on a housing loan for a self-occupied or vacant property(Section 24)

• Chapter VI-A deduction (Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA)

• Any additional perquisites or perks are exempt or deducted.

• Income from a family pension is deducted.

• Allowances for transportation in the case of a disabled individual.

• Conveyance allowance earned to cover transportation costs incurred as part of the job.

• Any compensation received to meet the expense of a tour or transfer.

• Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.

• Section 80CCD(2) allows for a deduction for the employer's contribution to the NPS account.

• Expenses for additional employees are deducted (Section 80JJA).

In terms of tax planning, deciding on a tax regime at the start of the fiscal year is critical. A taxpayer must compare the new tax regime's income tax to the previous regime's income tax. The investments and TDS or advance tax payable computations are made in accordance with the taxpayer's choice of the tax system at the start of the year. In addition, if the taxpayer wishes to use the new tax regime, he or she must submit Form 10IE to the IRS before filing the return. I hope this answer suffices your question of what is new tax regime?

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