However, the new tax regime is applicable to only those who are willing to part with the deductions and exemptions those who wish to retain them will continue to be taxed in accordance with the old regime. That means someone with an income of Rs 15 lakh per annum can avail of tax benefits worth Rs 78,000.
Says Archit Gupta, the founder and CEO of ClearTax, a fintech platform, “With the optional new regime, taxpayers will have to evaluate what works better. Those committed to long-term saving and investing via 80C may be discouraged, and this may likely demotivate taxpayers from tax-saving linked investing."
Atul Lotlikar, 46, is a senior executive with an IT company and his wife Anuya, 41, works with a leading school chain as deputy manager—academic operations. Atul and Anuya have a 12-year-old son, Avaneesh, who studies in Class 8. They have no other dependents. The couple has a combined family income of Rs 15 lakh-plus per annum, which puts them in the highest tax bracket of 30 percent.
Atul and Anuya need to build a corpus of about Rs 4.6 crore by 2031 to meet their goals:
- Rs 40 lakh and Rs 60 lakh for Avaneesh"s graduation and post-graduation, respectively
- Rs 35 lakh for Avaneesh"s wedding
- Rs 3.25 crore for their retirement.
They started saving since 2012, through a combination of mutual funds, provident fund and gold, and stayed patiently through turbulent markets, letting their money compound across the cycles.
Says Shah, “At present, Atul gets about Rs 1.75 lakh of tax benefits through various exemptions (HRA, NPS, 80C & D). The new tax regime benefits him by Rs 78,000 only. It doesn’t make sense for him to switch to the new regime. The tax provisions of Budget 2020 give him no benefits as such and Atul will stick to the old taxation structure."
First Published: Feb 01, 2020, 15:41
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