[meerkat]

Originally Posted by DigitalOne

I see too many youngsters signing fake rent receipts to claim paltry HRA tax benefits, and it pains to see how stupid rules can make people behave corrupt. .... This simplification if it brings about a change in at least a few to be honest, it would be a positive.

(emphasis mine)

I like that,

"I am really an honest person (if only because I couldn't find a way to be corrupt)".

... And all these years I believed honesty is a mindset!
.

[sidpunjabi]

Originally Posted by praveen789

Just look at how it looks for someone who earns INR 10 lakhs and was claiming deduction of INR 2 lakhs (INR 1.5 lakhs under 80C and 50k standard deduction):

Originally Posted by Researcher

You have summed it up pretty well, except that there is no income tax till ₹5 lacs (not 5% from ₹2.5 lacs till ₹5 lacs as per your calculation) as per the slide from the budget website. So that reduces ₹12,500.

Originally Posted by praveen789

I hope that is indeed the case as that will tilt the favour for a few people atleast. From what I understood, the tax was 0 only if your total income is less than 5 lakhs. In other words, 5% for 2.5-5 lakhs continues if total income is more than 5 lakhs.

Originally Posted by padmrajravi

This calculation is wrong. For someone with 10 lakhs income in old tax scheme, will have an 8 lakh taxable income after 2 lakh deduction. The tax would be as follows.

.....

So a benefit of 10000 Rs as per the new scheme. This will go up as you salary increase. People in 10 - 20 lakhs income scheme will get some substantial benefit.

Originally Posted by NICHE

Old tax for 20 lakhs (On the assumption that the exemptions are 150000 in 80C and 50000 in NPS) =
250000*0 + 250000*0.05 + 500000*0.2 + 800000*0.3 = 352500

New tax = 500000*0 + 250000*0.1 + 250000*0.15 + 250000*0.2 + 250000*0.25 + 500000*0.3 = 325000

There's a lot of confusion in the tax rates of the Rs 2.5 lakh to 5 lakh taxable income slab. I'm attaching the tax rates and quotes from the budget's documents to clarify the same.

(Discl: Images are from publicly available documents which can be accessed on the Union Budget website - indiabudget.gov.in).


Below are the exact wordings from the Feb-19 Interim Budget speech presented by the then FM - Hon. Piyush Goyal regarding the tax rate. Note the underlined wording.



The devil lies in the details of this jargon.

A tax rebate is not the same as a tax exemption. It's more like a refund.

In the Old regime:

If one's taxable income (after reducing all deductions) - falls below the Rs. 5 lakh limit but over Rs. 2.5lakh - he/she will receive a max refund of Rs. 12,500.

So, if your taxable income is Rs. 5 lakh - you will still pay TDS/ Advance Tax at a rate of 5%. This come to 0.05 * 5,00,000 = 12,500 as Advance tax. When you file your return at the end of the year, the government will refund the Rs. 12,500. So effectively you have paid Rs. 0 in tax.

However, if your taxable income is over Rs. 5 lakh - say even Rs. 5,01,000, you will pay advance tax of 0.05 * 5,00,000 + 0.2 * 1,000 = 12,500 + 200 = 12,700 and receive a refund of Rs. 0. Effectively, you've paid Rs. 12,700 in tax.




Here's a comparison of the tax rates under the old and new regime (as per the latest budget's speech document) which should help clarify things further.

[Researcher]

Originally Posted by praveen789

This has got to be the biggest hogwash and trick used to deceive people as if some major reduction has happened. Just look at how it looks for someone who earns INR 10 lakhs and was claiming deduction of INR 2 lakhs (INR 1.5 lakhs under 80C and 50k standard deduction):
Attachment 1963230
You add even a minimum HRA and the 'new' tax regime starts becoming costlier than the existing one.

Originally Posted by sidpunjabi

There's a lot of confusion in the tax rates of the Rs 2.5 lakh to 5 lakh taxable income slab. I'm attaching the tax rates and quotes from the budget's documents to clarify the same.
(Discl: Images are from publicly available documents which can be accessed on the Union Budget website - indiabudget.gov.in).
Below are the exact wordings from the Feb-19 Interim Budget speech presented by the then FM - Hon. Piyush Goyal regarding the tax rate. Note the underlined wording.
Attachment 1964713
The devil lies in the details of this jargon.
A tax rebate is not the same as a tax exemption. It's more like a refund.
In the Old regime:
If one's taxable income (after reducing all deductions) - falls below the Rs. 5 lakh limit but over Rs. 2.5lakh - he/she will receive a max refund of Rs. 12,500.
So, if your taxable income is Rs. 5 lakh - you will still pay TDS/ Advance Tax at a rate of 5%. This come to 0.05 * 5,00,000 = 12,500 as Advance tax. When you file your return at the end of the year, the government will refund the Rs. 12,500. So effectively you have paid Rs. 0 in tax.
However, if your taxable income is over Rs. 5 lakh - say even Rs. 5,01,000, you will pay advance tax of 0.05 * 5,00,000 + 0.2 * 1,000 = 12,500 + 200 = 12,700 and receive a refund of Rs. 0. Effectively, you've paid Rs. 12,700 in tax.
Here's a comparison of the tax rates under the old and new regime (as per the latest budget's speech document) which should help clarify things further.
Attachment 1964714

Apologies, I had totally missed out the part of tax rebate only if your total earning after exemptions were under ₹5 lacs. This post made me recall that it was a recent change. This new option is quite confusing to be honest. No one in the office I spoke to is happy nor clear about this. Let's see if some official clarity is obtained in near future.

[sidpunjabi]

Originally Posted by Researcher

Apologies, I had totally missed out the part of tax rebate only if your total earning after exemptions were under ₹5 lacs. This post made me recall that it was a recent change. This new option is quite confusing to be honest. No one in the office I spoke to is happy nor clear about this. Let's see if some official clarity is obtained in near future.

The general opinion is that the new regime possibly works best for small / medium business owners who, probably, cannot use many of the deductions / exemptions out there to reduce their taxable income.

Salaried individuals however, depending on the deductions / exemptions availed, are likely to be better off on the old / current regime.

[kiku007]

When you can't convince someone, then confuse them.


There's probably more conversations about which option of IT is better than about the economic situation.


Well played actually.

[DigitalOne]

Twitter thread on the new tax option by Deepak Shenoy of CapitalMind

[sidpunjabi]

ET recently published this article surrounding the Rs. 5 lakh tax rebate conundrum. This is applicable for tax being paid in the current financial year - FY 2019-20.

For the financial year 2019-20, if a person's net taxable income (i.e., income after subtracting all the deductions and tax-exemptions the person is eligible for) does not exceed Rs 5 lakh, then he/she is eligible for rebate of the full tax payable on the income. As per current income tax laws, a person is eligible for tax rebate up to Rs 12,500 under section 87A, if the net taxable income does not exceed Rs 5 lakh. Therefore, the tax liability in such a situation will be zero.

However, if your net taxable income exceeds Rs 5 lakh by even Re 1, say it is Rs 5,00,001, then you will not be eligible to avail the benefit of tax rebate. You will be liable to pay taxes as per the income tax rates applicable to your income.

Individuals, whose income just exceeds Rs 5 lakh, would be liable to pay more tax than the amount by which their income exceeds Rs 5 lakh. Consequently, a person with a taxable income of Rs 5,10,000 is likely to be left with a post tax income lower than Rs 5 lakh. This can be explained with an example.

Suppose your net taxable income is Rs 5, 10,000. Then in such a case, here is what your tax liability will look like:

Ref: Image at the end of this post

As shown in the example above, even a marginal increase in income above Rs 5 lakh has resulted in more tax outgo than the incremental income. Increase in income beyond Rs 5 lakh is marginal - only by Rs 10,000 but the tax liability due to such incremental increase is Rs 15,080. Consequently, after paying the Rs 15,080 as tax, the person would be left with post tax income of Rs 5,10,000 minus Rs 15,080 i.e. Rs 494,920. On the other hand, a person having taxable income of Rs 5 lakh will be left with a post tax income of Rs 5 lakh (tax rebate for income up to Rs 5 lakh).

You can read the full article here - Link


Hope this helps clear up things!!