Arti Arora, CFP | Head Financial Planner
The income tax filing deadline has been pushed to 30th November from the usual 31st July for this year. The primary reason for this is COVID and the havoc it has played in our lives and of course, with economies around the world.
This year is also special tax-wise because of one more reason. That reason is the introduction of a new personal income tax structure for individual taxpayers. The new structure is concessional in nature as it comes with more tax slabs accompanied with lower tax rates.
So, for somebody earning Rs. 10 lac per annum, while the tax liability (excluding surcharge & education cess) would be Rs. 75000 in the old tax regime, it will be Rs. 37500 in the new one. As we go up the income slabs, the maximum benefit under the new structure is restricted to Rs. 75000 vis-à-vis the existing one.
While there is a choice for us to exercise, one needs to evaluate all the pros and cons in detail. The new structure takes away most of the previous deductions such as the standard deduction, 80C, interest on home loans and some others that were being largely availed by most of us.
The role of planning and compliance in taxation thus becomes limited in the new regime and individual taxpayers have lesser paperwork to do and of course additional liquidity in their hands. The choice of investment products too is yours and while earlier the focus remained on tax saving investment avenues, the scenario can of course change now.
Having noted that, sometimes a forced saving scenario is necessary to keep the future in perspective and sometimes we do need that extra incentive to pull ourselves up to save and invest for our ‘future life’ in light of how we would like it to be. The old income tax regime was doing exactly this, so that over a period, with these forced savings and investments, one could provide for any future eventuality and fund their life goals as and when they came up.
We have a choice to make and it should be an informed one. Whichever tax regime you may choose to follow, it is pertinent that you follow a committed and disciplined approach to your savings and investments and also that your financial life rests on solid pillars in form of adequate coverage of your life and non-life assets to tide over any eventuality or challenge that life may offer.