New Tax Regime Vs Old Tax Regime: Some important things you need to know

The budget for 2020-21 has introduced a new tax regime, wherein an individual taxpayer can opt for lower tax rates coupled with very few deductions available and fewer exempt allowances available.

Double-Edged Sword Regime of Tax: In the history of human race, there is only one thing that is constant, and that is change. Similarly, this is the first time since the attainment of Independence by India that there is an optional tax regime. This year’s tax regime is synonymous to a double-edged sword where you have a choice and you can narrow your choices.

New Tax Regime
The budget for 2020-21 has introduced a new tax regime, wherein an individual taxpayer can opt for lower tax rates coupled with very few deductions available and fewer exempt allowances available.

Old or Regular Tax Regime
Whereas in a regular tax regime, a taxpayer has to pay tax at higher rates; however, he has the right to claim various exemptions and deductions.

What are the implications of choices based Tax Regime for Salaried class and Business fraternity?

Effect on Salaried Class
A salaried person has special privileges in the sense that The salaried person has the right to choose between the old tax regime or the new tax regime every year. For instance, Aakash who is working at Sag Infotech can opt for a New Tax regime in the FY2020-2021 and in the next Financial year 2021-22 he can
Either Opt for Old tax regime or
Continue with a New tax regime

Effect on Business Class
No Choice after the first choice of New Tax Regime.
A person with Business Class has limitation in a double-edged regime of tax and he has to evaluate the effect of tax regime on a long term basis and then select a particular tax regime as once he selects a particular tax regime, in the next year, he cannot shift to other tax regimes. If Vikas is a businessman and he shifts to a New Tax regime in the FY 2020-2021
In the FY 2021-22 he cannot shift to the Old Tax Regime

OR
If Vikas chooses to continue with the Old Tax regime in FY 2020-2021
In the FY 2021-22, he can continue with the Old Tax regime
In the FY 2021-22, he can switch to the New Tax Regime. But in the following years i.e. FY 2022-23, he cannot switch back to the Old Tax regime and has to continue with the New Tax regime.

Shrinked the Period for Filing the Belated ITR or For Revising Filed ITR

Earlier
If you failed to file your ITR by the due date (that was July 31st ), then also you could file ITR by March 31st along with the late fee. A similar rule was applicable in case of omission or mistake.

Now
The Finance Bill 2021-2022 has proposed to reduce the time limit by 3 months i.e. till December 31st of the same financial year. Consequently, don’t procrastinate the filing of Income Tax Returns.

Inclusion of Dividend Income in ITR for the year ended March 31 2021

Earlier
Till March 31, 2020, the dividend that was received from
Indian Companies as well as
Mutual funds schemes
was tax-free from your hands. The reason being the Tax levied was paid by the Mutual Fund or the Company

Now
The Dividend is taxable in your hands. Kindly refer to Form Number 26 AS for tax rates.

(By Amit Gupta, MD, SAG Infotech)