Best Tax Slab according to your salary | Old vs New Tax Regime 2024: Which one saves you more money?

pranjal kamra

11 Jun 202415:28

Summary

TLDRThe video script by Prajwal Kammara discusses tax regulations in India without the need for a Chartered Accountant's study. It compares the old and new tax regimes, explaining tax slabs, deductions, and how to maximize tax savings for salaried employees with varying income levels. The script simplifies the complexities of tax filing and provides insights into which tax regime—old or new—might be more beneficial for different income brackets, using practical examples and a tax calculator tool for easy decision-making.

Takeaways

📚 The speaker, Praanjal Kamra, discusses tax slabs and regimes without having studied Chartered Accountancy, aiming to simplify tax understanding for the audience.
🔄 The government's primary motive for introducing a new tax regime was to reduce confusion and complexity, but it has seemingly increased it by maintaining both old and new tax regimes.
💼 For salaried individuals, understanding which tax regime to choose between the old and new is crucial, as it can significantly impact tax savings and liabilities.
📉 The new tax regime offers lower tax rates but fewer deductions compared to the old regime, which had simpler tax slabs but higher tax rates.
💰 Different income levels have different tax implications; for example, income up to 5 lakhs has no tax, 5-10 lakhs is taxed at 20%, and so on.
🔍 The script explains the tax slabs in detail, emphasizing how the tax rate applies to different income brackets and the importance of understanding these for tax planning.
📉 The old tax regime had more deductions but higher tax rates, which could be beneficial if one can utilize all the deductions available.
📈 The new tax regime simplifies tax calculations by reducing the number of deductions and offering lower tax rates, making it more straightforward for most taxpayers.
🏦 The script mentions that some deductions like Provident Fund (NPS) contributions are still available under the new tax regime, making it attractive for those focused on long-term savings.
🏠 Home rent allowance, house rent, and other deductions under section 80C are available only in the old tax regime, not in the new one.
🔑 The speaker suggests using an online tax filing platform that can automatically calculate tax savings, suggest the best tax regime, and handle the complexities of tax filing.

Q & A

What is the primary motivation behind the government's decision to introduce a new tax regime?
-The primary motivation behind the government's decision to introduce a new tax regime was to reduce confusion and complexity in the tax system.
How does the new tax regime aim to simplify tax filing for a salaried employee?
-The new tax regime simplifies tax filing by offering lower tax slabs, fewer deductions, and a more straightforward structure, making it easier for salaried employees to understand and file their taxes.
What are the tax slabs under the old tax regime for different income levels?
-Under the old tax regime, the tax slabs are as follows: up to 2.5 lakhs no tax, 2.5 to 5 lakhs 5% tax, 5 to 10 lakhs 20% tax, and above 10 lakhs 30% tax.
What is the difference between the old and new tax regimes regarding deductions and exemptions?
-The old tax regime has more deductions and exemptions available, such as various tax-saving investments and allowances. The new tax regime, on the other hand, has fewer deductions but offers a more simplified tax structure.
How does the new tax regime benefit a taxpayer with an income between 5 to 6 lakhs?
-A taxpayer with an income between 5 to 6 lakhs benefits from the new tax regime as they fall into a lower tax slab of 5% compared to the old regime's 10% slab.
What is the standard deduction available to salaried employees under the new tax regime?
-Under the new tax regime, the standard deduction available to salaried employees is up to 50,000, which is the same as in the old tax regime.
How does the rebate on tax payable differ between the old and new tax regimes?
-In the old tax regime, the maximum rebate on tax payable is up to 12,500, whereas in the new tax regime, the rebate is up to 25,000.
What are some of the deductions that are not available under the new tax regime?
-Some deductions that are not available under the new tax regime include deductions under section 80C for investments, education loan interest, and employer's contribution to NPS.
Why might someone still prefer the old tax regime despite the new regime's simplifications?
-Some individuals might prefer the old tax regime if they have existing tax-saving investments and can claim various deductions that are not available under the new tax regime, potentially leading to more tax savings.
What is the recommended approach for a taxpayer to decide between the old and new tax regimes?
-Taxpayers should consider their individual financial situation, including their income level, existing investments, and deductions. Using a tax calculator or consulting a tax expert can help determine which regime is more beneficial.
How can a taxpayer utilize technology to simplify the process of tax filing and regime selection?
-Taxpayers can use online tax filing platforms that offer automated tax regime selection, calculation of tax savings, and step-by-step guidance through the tax filing process, making it more efficient and less confusing.

Outlines

00:00

📊 Tax Regime Comparison for Salaried Employees

The speaker, Prajal Kamra, discusses the complexities of choosing between the old and new tax regimes in India without having studied chartered accountancy. He outlines the tax slabs and rates for different income levels, explaining the benefits and drawbacks of each regime. The old regime is characterized by higher deductions but higher tax rates, while the new regime offers lower tax rates with fewer deductions. Prajal emphasizes the government's intent to reduce confusion and complexity but acknowledges that the dual regime system may have increased confusion for some taxpayers.

05:03

🔍 Navigating Tax Deductions and Rebates in New and Old Regimes

This paragraph delves into the intricacies of tax deductions and rebates under both the old and new tax regimes. The speaker clarifies the standard deductions available to salaried employees and how these have been simplified in the new regime. He also discusses the rebates available under each regime, noting that the new regime offers higher rebates for income up to INR 7 lakhs compared to the old regime's limit of INR 5 lakhs. The summary highlights the importance of considering individual financial situations when choosing a tax regime.

10:04

📉 Simplification of Tax Filing with Online Platforms

The speaker introduces an online tax filing platform that simplifies the process of tax filing for salaried employees. The platform offers features like automatic tax regime selection, deduction suggestions, and capital gain calculations. It also provides AI assistance for form selection and free notice management, along with 24/7 support. The speaker emphasizes the ease of use and the comprehensive nature of the platform, which can handle the complexities of tax filing without the need for chartered accountancy knowledge.

15:05

📈 Case Studies for Tax Regime Decision-Making

Prajal Kamra presents hypothetical user cases to illustrate how the tax calculator can be used to determine the most beneficial tax regime based on individual income and investment scenarios. He compares the effective tax rates under the old and new regimes for different income brackets and investment levels, showing that the new regime is generally more advantageous for most cases, especially for fresh starters with fewer investments. The speaker also mentions a discount offer for using a specific code, providing an additional incentive for using the tax calculator.

Mindmap

Keywords

💡Tax Regime

A tax regime refers to a system of taxation that is established by a government. In the context of the video, the speaker discusses the differences between the old and new tax regimes in India, emphasizing the changes made by the government to reduce confusion and complexity but inadvertently increasing it by maintaining both regimes simultaneously.

💡Salary

Salary is a fixed, regular payment made by an employer to an employee, typically calculated on an annual or monthly basis. The video script frequently refers to salary brackets, discussing how different tax rates and slabs apply to various income levels, which is crucial for determining the amount of tax an individual must pay.

💡Tax Slabs

Tax slabs are the income ranges within which taxpayers fall to determine the rate of tax they need to pay. The script explains how tax slabs are structured differently in the old and new tax regimes, affecting the tax liability of individuals with varying income levels.

💡Tax Deductions

Tax deductions are expenses that can be subtracted from an individual's taxable income, reducing the amount of tax owed. The video discusses how the new tax regime has simplified deductions, removing many of the previous options available under the old regime.

💡Investments

Investments in the context of the video refer to financial instruments or property that taxpayers can use to claim deductions and reduce their taxable income. The speaker mentions various types of investments and how they can influence the choice between the old and new tax regimes.

💡Rebates

Rebates are reductions in tax liability that taxpayers can claim under certain conditions. The script explains how rebates are calculated differently under the old and new tax regimes, with the new regime offering higher rebates up to a certain income level.

💡Tax Planning

Tax planning involves strategies to minimize tax liability within legal limits. The video script suggests that tax planning has become more complex due to the dual tax regimes and the need to choose the most beneficial one based on individual circumstances.

💡Tax Filing

Tax filing is the process of submitting one's tax return to the tax authority. The video emphasizes the complexity of tax filing under the new and old regimes and introduces a tool to simplify the process by automatically selecting the best tax regime and providing tax-saving suggestions.

💡Income Tax

Income tax is a tax imposed on individuals' earnings, which is a central theme of the video. The speaker discusses how income tax rates and the process of paying income tax differ between the old and new tax regimes, affecting taxpayers' decisions.

💡National Pension Scheme (NPS)

The National Pension Scheme is a government-backed pension plan that offers tax benefits. The video script mentions NPS as an example of an investment option that continues to provide deductions under the new tax regime, making it an attractive choice for taxpayers.

💡Health Insurance

Health insurance provides coverage for medical expenses and is a deductible expense for tax purposes. The script notes that deductions for health insurance premiums are no longer available under the new tax regime, which is a significant change from the old regime.

Highlights

The speaker, Prajwal Kammara, discusses tax slabs and regimes without having studied Chartered Accountancy.

Recommendation for salaried employees to understand the new tax regime for better tax savings.

Explanation of the old tax regime's complexities and higher tax slabs.

Introduction of the new tax regime with lower tax slabs and fewer deductions.

Comparison between old and new tax regimes for different income levels.

The impact of the new tax regime on tax savings for those with an income of 5 to 20 lakhs.

Details on how to maximize tax savings under the new tax regime.

The government's decision to simplify tax filing and reduce confusion.

The unintended increase in complexity due to the introduction of the new tax regime.

The benefits of the new tax regime for those earning between 5 to 6 lakhs and 12 to 15 lakhs.

The lack of deductions in the new tax regime and its implications for taxpayers.

Comparison of standard deductions available under both old and new tax regimes.

The advantage of rebates in the new tax regime for income up to 7 lakhs.

Discussion on the applicability of section 80C deductions under the old tax regime.

The unavailability of deductions like house rent allowance and HRA in the new tax regime.

The impact of employer contributions to NPS on tax savings in the new tax regime.

The use of ClearTax's online tax filing platform for simplified tax planning and filing.

How the ClearTax platform helps in selecting the best tax regime and provides tax-saving suggestions.

The importance of considering individual financial situations when choosing a tax regime.

The provision of a free tax calculator in the video description to compare tax liabilities under different regimes.

The conclusion that for most fresh starters or those without many investments, the new tax regime is preferable.