Tax Filing Under the New Tax Regime in India
The introduction of the new tax regime in India has brought about a lot of changes that affect the tax filing process. While it aims to simplify the tax process for taxpayers, it comes with new rules and regulations that need to be followed. In this article, we will discuss the tax filing process under the new tax regime in India, and the key differences between the old and new tax systems.
Introduction
The new tax regime was introduced in the Union Budget 2020, and it became effective from the assessment year 2021-22. It offers taxpayers a choice between the old tax regime and the new tax regime. Under the new tax regime, taxpayers have the option to pay tax at lower rates with fewer deductions and exemptions.
The new tax regime is an optional tax regime, which means that taxpayers can choose between the old and new regimes when filing their income tax returns. However, once a taxpayer selects the new tax regime, they cannot switch back to the old tax regime for the same financial year.
Tax Filing Process Under the New Tax Regime in India
The tax filing process under the new tax regime in India is similar to the tax filing process under the old regime. Taxpayers are required to file their income tax returns on time to avoid any penalties.
Under the new tax regime, taxpayers are required to select the new tax regime option while filing their income tax returns. They will have to provide details of their income and calculate the tax liability based on the new tax rates applicable under the new tax regime.
The income tax returns can be filed online or offline as per the taxpayer’s convenience. The online filing of income tax returns is the most convenient way for taxpayers to file their returns. Taxpayers can use the Income Tax e-filing portal to file their returns online.
Under the new tax regime, taxpayers are required to provide details of all their income sources, including salary, business income, capital gains, and other sources. They will also have to provide details of their investments and deductions under the new tax regime.
Key Differences Between Old and New Tax Regime
Now, let’s take a look at the key differences between the old and new tax regimes:
- Tax Rates
Under the old tax regime, different tax slabs were available for taxpayers based on their income. The tax rates under the old regime were higher than the new tax regime. Under the new tax regime, taxpayers have the option to pay tax at lower rates without availing any deductions or exemptions. The new tax rates range from 5% to 30%, depending on the income slab.
- Deductions and Exemptions
Under the old tax regime, taxpayers were allowed deductions and exemptions on various investments and expenses like tuition fees, medical expenses, interest on home loans, etc. These deductions and exemptions helped in reducing the total taxable income of the taxpayer. However, under the new tax regime, taxpayers are not allowed to claim any deductions or exemptions. However, taxpayers can claim certain specified deductions under Chapter VI-A of the Income Tax Act. These deductions include contributions to the National Pension Scheme, Public Provident Fund, and medical insurance.
- Alternate Minimum Tax
The Alternate Minimum Tax (AMT) was introduced under the old tax regime to ensure that higher-income taxpayers did not escape tax by claiming excessive deductions and exemptions. Under the old tax regime, taxpayers were required to pay the AMT if the total tax payable, after deductions and exemptions, was less than 18.5% of their adjusted total income. However, under the new tax regime, the AMT has been abolished.
- Capital Gains Tax
Under the old tax regime, capital gains tax was calculated based on the period of holding of the asset. If the asset was held for more than 12 months, it was considered a long-term capital asset, and the tax rate was lower than that of a short-term capital asset. However, under the new tax regime, the tax rate on capital gains is the same, irrespective of the period of holding.
- Dividend Income
Under the old tax regime, dividend income was taxable at the taxpayer’s applicable slab rate. However, under the new tax regime, dividend income is taxable at a flat rate of 10% for all taxpayers.
Conclusion
In conclusion, the new tax regime has brought about significant changes to the tax system in India. While it offers taxpayers lower tax rates, it does come with new rules and regulations that need to be followed. Taxpayers who are contemplating switching to the new tax regime should carefully consider the pros and cons of both regimes, and make an informed decision based on their individual financial situation. Additionally, they should ensure that they meet all the requirements for filing their income tax returns, as failure to do so can result in penalties and interest charges.
