{"id":408,"date":"2020-04-15T06:51:48","date_gmt":"2020-04-15T06:51:48","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=408"},"modified":"2020-05-09T05:09:57","modified_gmt":"2020-05-09T05:09:57","slug":"will-new-tax-regime-benefit-investors-or-not","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/will-new-tax-regime-benefit-investors-or-not\/","title":{"rendered":"Will New Tax Regime Benefit Investors or Not?"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p>In\nthe wake of nationwide lockdown for dealing with coronavirus pandemic, India\u2019s\nFinance Act has recently received the Presidential assent on March 27, 2020,\nwithin it contains the new tax regime for Financial Year 2020-21 (FY2020-21),\nwhich would be incorporated in the Income-Tax Act 1961. In this regard, the\nCentral Board of Direct Taxes had already issued the circular detailing the process\non April 13 for employers to follow while deducting taxes from April onwards.\nThis new-tax regime first proposed in Union Budget 2020 as a new, simplified\ntax regime under which taxpayers can benefit from reducing tax liabilities. <\/p>\n\n\n\n<p>Up\nuntil now, the investors strategically allocate their income into specified\ntax-saving investment products like PPF, NPS, ULIPs, Tax-Saver FDs, ELSS, NSCs\netc. to claim the deductions of Rs. 1.5 lakh under Section 80C of Income Tax\nAct 1961. As per new tax-regime, the investors will no longer claim deductions\nunder 80C but will be free to make investments according to the financial goals\nwithout bounded to tax-savings. Also, it will put an end to the hassle of\nfiling complicated ITR forms. <\/p>\n\n\n\n<p>Now\nthe question is, <strong><em>\u201cWill switching to the new tax regime will benefit investors or not?\u201d<\/em><\/strong><\/p>\n\n\n\n<p>But, before we move any further let\u2019s take a look at the illustrative table of New Vs Old Tax-Regime. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list\"><li><a href=\"#New_Vs_Old_Tax-Regime\" title=\"New Vs Old Tax-Regime \">New Vs Old Tax-Regime <\/a><\/li><li><a href=\"#Will_New_Tax-Regime_Benefit_Investors_Explanation\" title=\"Will New Tax-Regime Benefit Investors? \u2013 Explanation\">Will New Tax-Regime Benefit Investors? \u2013 Explanation<\/a><\/li><li><a href=\"#Final_Thoughts\" title=\"Final Thoughts: - \">Final Thoughts: - <\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">New Vs Old Tax-Regime <\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"\"><tbody><tr><td>\n  <strong>Annual\n  Income<\/strong>\n  <\/td><td>\n  <strong>Tax\n  Liability in Rupees (excluding surcharge and education cess)<\/strong>\n  <\/td><\/tr><tr><td>\n  \n  <\/td><td>\n  <strong>As\n  per new tax regime<\/strong>\n  <\/td><td>\n  \n  <\/td><td>\n  <strong>As\n  per existing tax regime*<\/strong>\n  <\/td><td>\n  <strong>Benefit\n  as per the new tax regime<\/strong>\n  <\/td><\/tr><tr><td>\n  \n  <\/td><td>\n  <strong>Slab\n  Rates (%)<\/strong>\n  <\/td><td>\n  <strong>As\n  per new tax regime (No deduction\/exemption available)<\/strong>\n  <\/td><td>\n  <strong>Slab\n  Rates (%)<\/strong>\n  <\/td><td>\n  <strong>As\n  per the existing tax regime (deduction\/exemption available, but not\n  considered)<\/strong>\n  <\/td><td>\n  \n  <\/td><\/tr><tr><td>\n  2,50,000\n  <\/td><td>\n  &#8211;\n  <\/td><td>\n  &#8211;\n  <\/td><td>\n  &#8211;\n  <\/td><td>\n  &#8211;\n  <\/td><td>\n  &#8211;\n  <\/td><\/tr><tr><td>\n  5,00,000\n  <\/td><td>\n  5%**\n  <\/td><td>\n  &#8211;\n  <\/td><td>\n  5%**\n  <\/td><td>\n  &#8211;\n  <\/td><td>\n  &#8211;\n  <\/td><\/tr><tr><td>\n  7,50,000\n  <\/td><td>\n  10%\n  <\/td><td>\n  37,500\n  <\/td><td>\n  20%\n  <\/td><td>\n  62,500\n  <\/td><td>\n  25,000\n  <\/td><\/tr><tr><td>\n  8,00,000\n  <\/td><td>\n  15%\n  <\/td><td>\n  45,000\n  <\/td><td>\n  20%\n  <\/td><td>\n  72,500\n  <\/td><td>\n  27,500\n  <\/td><\/tr><tr><td>\n  10,00,000\n  <\/td><td>\n  15%\n  <\/td><td>\n  75,000\n  <\/td><td>\n  20%\n  <\/td><td>\n  1,12,500\n  <\/td><td>\n  37,500\n  <\/td><\/tr><tr><td>\n  12,50,000\n  <\/td><td>\n  20%\n  <\/td><td>\n  1,25,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,87,500\n  <\/td><td>\n  62,500\n  <\/td><\/tr><tr><td>\n  15,00,000\n  <\/td><td>\n  25%\n  <\/td><td>\n  1,87,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  2,62,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  50,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  12,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  13,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  75,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  19,87,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  20,62,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  1,00,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  27,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  28,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  1,50,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  42,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  43,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  2,00,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  57,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  58,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  3,50,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,02,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,03,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  5,00,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,47,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,48,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><tr><td>\n  5,50,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,62,37,500\n  <\/td><td>\n  30%\n  <\/td><td>\n  1,63,12,500\n  <\/td><td>\n  75,000\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Will New Tax-Regime Benefit Investors? \u2013 Explanation<\/h2>\n\n\n\n<p>As you\nknow up until now, the investors with taxable income were bound to invest in\ntax-saving investment options to benefit from exemptions of Section 80C under\nIT Act 1961. As a result, many investors had to invest in tax-efficient but\ninefficient low-return investment options which were slowing down their wealth creation\ngoals and even slowly eroding their wealth during the inflation period. <\/p>\n\n\n\n<p>For instance,\nwith the existing tax-regime, an investor invested in a tax-saving FD which\nadvertises an interest rate of 6.5 per cent per year. If you are falling in the\nbracket of 30 per cent, the post-tax-returns from your investment made in FD\nwill be just near 4.55 per cent. And if the inflation rate is at 5 per cent for\nthe year then you would be lost 0.45 per cent of your money which you were\nkeeping in FD. &nbsp;<\/p>\n\n\n\n<p>Instead, if the investor invested directly in equities can benefit from the high, inflation-adjusted returns overtime. However, there would be major risks involved but over the long-term, the equity comes out as a better <strong><a href=\"https:\/\/www.invest19.com\/blog\/best-investment-option-for-salaried-person-in-india\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"investment option (opens in a new tab)\">investment option<\/a><\/strong> that can help you in achieiving your future financial goals. With the new tax regime, the investors who were once bound to invest in tax-saving schemes will now have the flexibility of customizing the investment option on their own. <\/p>\n\n\n\n<p>But,\nthat\u2019s the ideal scenario! <\/p>\n\n\n\n<p>It\nhas often seen that many people un-willingly invest in such tax-saving schemes\nbecause they want to save their taxes not because they are interested in\nbuilding wealth for their future sake. With the increased liquidity, the\ninvestors will be tempted to spend more leading to less saving than before. The\nearlier tax-regime not only helped to get a deduction for tax-saving but also\nlead to household savings. But, with the arrival of new tax-regime, it could\nchange the entire scenario drastically. What this means is that investors who\nwere investing in tax-saving schemes will get the upfront gain in their taxation,\nrisk losing much-higher returns that they would have otherwise received from the\ninvestments they made. <\/p>\n\n\n\n<p>So, the\nlower household saving will not only jeopardize investors long-term plans but\nalso lead to weak GDP growth. With the introduction of the new tax regime, the\nrates of savings could further declined. In short, we can say that the new-tax\nregime holds less scope for future savings and wealth growth. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Final Thoughts: &#8211; <\/h2>\n\n\n\n<p>In\nlight of the above and considering the new tax regime, there is no doubt that\ninvestors who once were retricted to invest in inefficient investment options\nto claim tax deductions under 80C will now have the leverage to decide the investment\noptions on their own. However, it would be advisable to do a comparative\nevaluation under both before opting to continue with the existing one or opting\nfor the new regime. <\/p>\n\n\n\n<p>Rest\nassured, the new tax-regime is optional and anyone can exercise this option at\nthe time of filing income tax returns. But, be sure to take that decision in\nthe beginning because if you decide to continue with the existing one then you\nwon\u2019t be able to get certain exemptions like LTA. <\/p>\n<div class='epvc-post-count'><span class='epvc-eye'><\/span>  <span class=\"epvc-count\"> 3,113<\/span><\/div><div class=\"pld-like-dislike-wrap pld-template-1\">\n    <div class=\"pld-like-wrap  pld-common-wrap\">\n    <a href=\"javascript:void(0);\" class=\"pld-like-trigger pld-like-dislike-trigger \" title=\"\" data-post-id=\"408\" data-trigger-type=\"like\" data-restriction=\"ip\" data-ip-check=\"0\" data-user-check=\"1\">\n                        <i class=\"fas fa-thumbs-up\"><\/i>\n                    <\/a>\n    <span class=\"pld-like-count-wrap pld-count-wrap\">4    <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>In the wake of nationwide lockdown for dealing with coronavirus pandemic, India\u2019s Finance Act has recently received the Presidential assent on March 27, 2020, within [&hellip;] <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/www.invest19.com\/blog\/will-new-tax-regime-benefit-investors-or-not\/\">Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":449,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,12],"tags":[96],"class_list":["post-408","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investment","category-wealth-management","tag-new-tax-regime"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/408","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=408"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/408\/revisions"}],"predecessor-version":[{"id":410,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/408\/revisions\/410"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/449"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=408"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=408"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=408"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}