The query uppermost in everybody’s thoughts is will the outdated tax regime be abolished in the Budget 2025? Well, this stays to be seen…
Currently, India’s revenue tax construction presents two distinct regime: the outdated regime with numerous exemptions and deductions, and the new tax regime with simplified, decrease tax charges however fewer advantages.
The new Income-Tax (I-T) regime, which was launched from monetary 12 months 2020-21 for particular person taxpayers, is now the default regime, except the taxpayer opts in any other case.
The Finance Act, 2024, little doubt made the new regime extra enticing, concessional slab charges can be found on revenue up to Rs 15 lakh with adjustments launched inside the slabs. Under the new tax regime, taxpayers can declare a rebate underneath Section 87A of up to Rs 25,000 if their complete revenue doesn’t exceed Rs 7 lakh, whereas the outdated regime permits a rebate of up to Rs 12,500 if the whole revenue doesn’t exceed Rs 5 lakh. Old regime presents an ordinary deduction of Rs 50,000 for salaried taxpayers and New regime presents a revised normal deduction of Rs. 75,000 for salaried taxpayers.
While the new regime has its advantages, a person can’t declare numerous deductions and exemptions. From the attitude of the salaried worker, the varied tax advantages which might be denied are: House Rent Allowance, Leave Travel Allowance, deductions underneath numerous sections of Chapter VI-A, which embody investments say to EPF which in any other case would have meant a deduction declare underneath part 80C.
Tax slab charges as per outdated and new tax regimes:
If a taxpayer doesn’t have a house mortgage, doesn’t pay hire, nor has vital exemptions or deductions, the new regime usually proves extra helpful.
However, there are two deductions that tax specialists state ought to ideally be allowed in the new regime additionally.
Allow a deduction for Mediclaim premium underneath the new regime: Section 80D permits a tax deduction of up to Rs.25,000 for medical insurance coverage premiums paid (it’s Rs.50,000 for senior residents). Preventive well being check-ups up to Rs.5,000 are included in these limits. The new regime of taxation doesn’t enable the deduction underneath part 80D.
“While various other deductions that are also disallowed under the new regime, are to encourage investments and savings, the expenses towards Mediclaim premiums and health check-ups are more of a necessity. Such deductions should be made available, irrespective of the regime opted for,” states Kinjal Bhuta, chartered accountant.
Tax specialists additionally level out the necessity for an appropriate improve in the deduction limits, particularly with the rise in prices of well being covers.
Allow a deduction to the in another way abled:
Under part 80U of the Income-tax (I-T) Act (relevant solely underneath the outdated tax regime) some financial respite is obtainable to people with disabilities, relying on the diploma of their incapacity, by providing a deduction towards their complete revenue. For incapacity between 40-80% the utmost deduction allowed is Rs. 75,000; in instances of extreme incapacity (80% or extra) the deduction restrict will increase to Rs. 1.25 lakh
A variety of disabilities (set circumstances are prescribed) are lined by this part, which embody blindness, visible impairment, deformities arising owing to leprosy, locomotion incapacity, psychological retardation, psychological sickness and a number of disabilities (mixture of two or extra disabilities in these specified classes). For a declare underneath this part a medical certificates from a acknowledged medical authority, specifying the character and share of incapacity is required.
Vishesh Sangoi, associate at DPS & Co, a agency of chartered accountants factors out that the Memorandum to the Finance Bill, 2016, which had revised upward the deduction restrict underneath part 80U had identified its necessity. “The government had clearly acknowledged the fact that the medical costs have been increasing and the needs of disabled people need to be given special emphasis. By taking away these deductions under the new tax regime, an ordinary person and a person with disability stand on the same footing as far as income tax is concerned,” stated Sangoi.
He provides, “Deduction under section 80U, which is aimed at providing financial relief to individuals with disabilities, is fundamentally different from investment-based tax breaks. Unlike deductions under sections 80C or 80D, which incentivize savings and insurance investments, section 80U offers a flat deduction directly addressing the additional costs incurred due to disability. This essential support is not available under the new tax regime with its lower rates, making it crucial to understand that such deductions serve distinct purposes and should not be compared. The choice between tax regimes must consider the unique benefits that deductions like Section 80U provide, beyond mere tax savings. Inclusion of these deductions would not only provide equitable tax relief to taxpayers but also uphold the principles of fairness and inclusivity in our tax system.”
