Vijay C Roy

Tribune News Service

Chandigarh, February 2

Two tax regimes now exist simultaneously, leaving the middle class confused. The Finance Minister announced that under the old regime it was almost impossible for a taxpayer to comply with the I-T law without the help of professionals. But even now the taxpayer will have to seek professional help.

Tax Liabilities Considering total deduction of Rs3,85,000 in old regime including house loan interest(Rs2 lakh), housing loan principal(Rs1 lakh), Medical Insurance(Rs25,000) and Interest Income Rs10,000

Like the GST, the government has introduced multiple income tax slabs with a gap of Rs 2.50 lakh each. The taxpayer has to give up benefits of deductions and exemptions and pay tax at flat rates under the new regime. This would mean that there would not be any tax benefit on savings. Also, the tax cut is not so substantial as to leave huge money in the hands of the middle class.

Under the new regime, the taxpayer will have to prepare tax computation for old and new structures and then make a decision. This would add up to the fee paid to consultants as also anxiety level. When read between the lines, Finance Bill 2020 makes it necessary for the employer to deduct TDS as per the old structure only. It is the responsibility of the taxpayer to decide which scheme he would want to opt for.

Experts say under the new scheme, taxpayers would end up paying more taxes. Other provisions, such as taxing dividend in the hands of individual instead of the company, would mean extra burden on the taxpayer. Says tax practitioner Keshav Garg: “Those who were maximising all tax benefits that are on offer will benefit by sticking to the old regime.” A host of exemptions and deductions are available to taxpayers. Salaried employees can avail of HRA and LTA. Those who have taken home loan can avail of a deduction of up to Rs 2 lakh on the interest portion of EMI and also on the principal portion (under Section 80 C). A deduction of up to Rs 1.5 lakh is available under Section 80C while deduction on health insurance premium can be availed of under Section 80D and also interest income.

Ankur Choudhary, Co-Founder & CIO, Goalwise.com, a direct mutual fund Investment platform says: “Although a new tax regime with lower tax rates has been introduced, the removal of exemptions will water down the benefits. On top of it, the option to choose the old or new I-T regime will complicate filing returns, already a complicated process for individual taxpayers.”