Income Tax Dept Launches e-Calculator For Finding Out Tax You Need To Pay: Compare Old & New Tax Rates
As per the reports, the Income-Tax Department has launched an e-calculator for individuals to estimate their tax liability if they opt for the new tax slabs, without claiming deductions and exemptions, for ITR filing as announced in the recent Budget, officials said on Thursday.
How Did This Happen?
On February 1, the Finance Minister Nirmala Sitharaman, proposed significant changes to the country’s direct tax regime, proposing two options for paying income tax in the fiscal year 2020-21 (FY21), also called the assessment year 2021-22 (AY22).
In her Budget speech, Sitharaman said “Currently, the Income Tax Act is riddled with various exemptions and deductions, which make compliance by the taxpayer and administration of the Income Tax Act by the tax authorities a burdensome process. It is almost impossible for a taxpayer to comply with the Income-tax law without taking help from professionals,”
To make it easier, the FM said announced a new tax regime, which reduces the income tax rate and tweaks the income tax slabs. However, taxpayers can avail of this new structure, which is optional, only if they choose to let go of a majority of exemptions currently offered by the Income Tax Act.
According to the new regime, taxpayers will pay 10%, 15%, 20% and 25% for incomes between Rs 5-7.5 lakh, Rs 7.5-10 lakh, Rs 10-12.5 lakh and Rs 12.5-15 lakh, respectively.
While previously, the taxpayers paid 20% for incomes between Rs 5-10 lakh and 30% for incomes between Rs 10-15 lakh.
To simplify the process, on Thursday, the Income Tax Department launched an e-calculator for individuals to estimate and compare their tax liability under the new tax slabs as compared to the existing regime.
To make it easy to access, the calculator, with a comparative table to compare taxes in the old and the new tax regime, for resident individuals (financial year 2020-21) has been hosted on the official e-filing website of the department.
How Does It Work?
Basically, This web portal is used for filing electronic ITRs by individuals and various other categories of taxpayers.
Also, the calculator, launched earlier in the day, was updated by the department in the evening to make it more “user-friendly”.
According to a senior official, It largely gives the user three broad results based on the kind of individual financial data fed into it.
Basically taxpayers in three age categories of normal citizen (below 60 years), senior citizen (60-79 years) and super senior citizen (above 79 years) can punch in their estimated annual income from all sources, total eligible deductions and exemptions to see what will be there total taxable income if they continue in the old regime or opt for the new one.
The calculator also takes into account eligible exemptions and deductions, as proposed under the new regime, after being extracted from the Budget memorandum 2020.
In the new personal income tax regime, as proposed by Union Finance Minister Nirmala Sitharaman in her Budget speech on Feb. 1, 5 percent tax is levied on an annual income between Rs 2.5 lakh to Rs 5 lakh. The tax rate rises to 10 percent,
Also, the old or the existing income tax rate regime allows a standard deduction of Rs 50,000 and investment of Rs 1.5 lakh in saving schemes with a rate of 5 percent, 10 percent or 30 percent tax depending on various income levels.