Income Tax Rule-The idea of the Government in the long run to abolish all exemptions and the old tax regime.

1. Old Tax regime to Continue and it is optional.

2. If no option is given, by default a new Tax regime will be applicable.

3. No Change in old tax regime rates.

4. The New Tax Regime-Standard deduction is now allowed for Pensioners/Salary class.

5. No other Concession /deduction like Sec 80 C, 80 D , 80 TTB available in New Tax regime.

6. No Tax liability up to Rs7,00,000 income per annum in the new tax regime. (Rebate under Sec87 A). Considering a standard deduction of Rs50,000/- Tax liability under new regime would be Nil up to a gross income of Rs7,50,000/- for pensioners.

7. Senior Citizen Savings Scheme (SCSS)investment limit raised to Rs 30 lakh from Rs15 lakh.

8. POMIS-Post office Monthly Income Scheme limit raised to Rs9 lakh ( from Rs 4.50 Lakh)per individual. The joint account limit raised to Rs15 lakh from Rs9 Lakh.

9. Leave encashment exemption limit, on retirement, for Non Govt employees raised to Rs25 lakh from Rs3 lakh.

10.New Tax Regime Rates (By default)

Up to Rs 3 Lakh-Nil

Rs 3 lakh to Rs 6 Lakh-5%

Rs 6 lakh-9 Lakh- Rs15,000+10%

Rs 9 lakh to 12 Lakh- Rs45,000+15%

Rs12 lakh-15 Lakh-Rs 90000+20%

Above 15 Lakh-Rs150000+30%

Maximum Surcharge reduced to 25% (from 37%-applicable for Taxable income of more than Rs5 Crore)

Surcharge -above Rs50 lakhs-10% to 25%

Cess-4% of Income Tax and SC

11.The income tax deductions still available in the new regime include:

• Sec 87 A benefit still available in the new regime. (No income tax up to Rs 7 lakh)

• Death-cum-retirement benefit

• Commutated value of pensions

• Leave encashment on retirement. (Enhanced to Rs 25 lakh)

• Amount received on VRS up to Rs 5 lakh

• Employee Provident Fund money

• Money received as scholarship for education.

• Cash received as awards constituted in public interest.

Short-term withdrawals and maturity amount from the National Pension Scheme.

12.Some of the Deductions that may not be available in the New Regime

• Senior Citizen, Very Senior Citizen Concession rates not available

• House rent allowance,

• Housing loan Interest

• Deductions under Sec 80 C, 80 D(Health insurance premium) , 80 DD , 80 TTB ( Interest on Bank Deposits)etc.

13.Comparison between two regimes:

a. If a Senior Citizen receives an annual pension of Rs 6 lakh, 80 C Savings of Rs 50,000/-, Std Deduction of Rs50,000/- with no other income.

Income Tax under old Regime- Nil

New Regime- Nil

b. If Pension income is Rs 7.50 lakh

If there is no savings under Sec 80 C,

Tax under Old Regime in this case would be-Rs 50,000/-+ Cess.

New Regime-Rs Nil.

c. A Senior Citizen drawing pension of Rs 6 Lakh, Deposit Interest income of Rs 3 Lakh, 80 C-Rs150,000/-80 D-Rs 50,000, 80TTB-Rs 50,000, Std Ded-Rs50,000/-

IT on Old Regime- Rs 30,000/-+Cess

Tax under New Regime-Rs 40,000+ Cess

My inference:

1. Based on the available data is for those who are in the lower tax bracket, with small savings if they can bring the Net Income below Rs 500,000/- old regime is preferable. For those in 30% tax slab in the old regime and those who do not want to save for Tax, new regime may be preferable. Before exercising option, Tax payers have to work out Tax liability in both regimes with their own figures and decide which is better based on their comfort level to Save, availing Existing or New Deductions and the Net Tax Liability under both Schemes. This can be done during the next FY , when the new rates will be applicable. Shortly I intend to bring out a ready reckoner in my website, so that it will be easy for tax payer to choose between old and new tax regime based on his income level and other deductions , savings .

2. The idea of the Government in the long run to abolish all exemptions and the old tax regime.