Page 101 - mutual-fund-insight - Mar 2021_Neat

basic exemptions and deductions – `1.5 are many avenues to spend and with
lakh under Section 80C, `50,000 under the new tax slabs, one major saving ave-
Section 80CCD(1B) and `25,000 under nue will be gone.
Section 80D, apart from the default
standard deduction of `50,000 – you can Know your equilibrium point
pay less tax than that in the new sys- Everyone will have their own set of
tem. Of course, if you include other deductions and exemptions. Hence, we
exemptions and deductions, such as have worked out equilibrium points for
house-rent allowance, you could be pay- various income groups (see the chart
ing even less tax. ‘The equilibrium points’). These repre-
The second cost is that if you follow sent the amount of deduction that
the new tax slabs, you may compromise brings the old and new tax structure at
on savings. No matter if tax-planning is par in terms of the tax payable. Any
pesky for some of us, it forces us to further deductions from these equilibri-
save. If not forced to, many of us don’t um points will make the old system
save enough. This can result in finan- beneficial as your tax outgo would
cial complications in the future, includ- reduce. If your tax-admissible expenses
ing during retirement. For the young and investments (not just 80C and 80D
generation especially, the new tax slabs ones but also your HRA, donations
can result in higher spending and less under Section 80G, etc.) are more than
saving. With rising consumerism, there the given equilibrium level, you can
New vs old: Which is more beneficial?

If basic exemptions and deductions are claimed (as stated in the footnote of this table), the existing
tax system beats the new one hands down.
Taxable income Tax payable
Income Deductions* Old regime New regime Old regime New regime Gain/Loss
7,50,000 2,75,000 4,75,000 7,50,000 0 39,000 -39,000
10,00,000 2,75,000 7,25,000 10,00,000 59,800 78,000 -18,200
12,50,000 2,75,000 9,75,000 12,50,000 1,11,800 1,30,000 -18,200
15,00,000 2,75,000 12,25,000 15,00,000 1,87,200 1,95,000 -7,800
17,50,000 2,75,000 14,75,000 17,50,000 2,65,200 2,73,000 -7,800
20,00,000 2,75,000 17,25,000 20,00,000 3,43,200 3,51,000 -7,800
22,50,000 2,75,000 19,75,000 22,50,000 4,21,200 4,29,000 -7,800
25,00,000 2,75,000 22,25,000 25,00,000 4,99,200 5,07,000 -7,800
27,50,000 2,75,000 24,75,000 27,50,000 5,77,200 5,85,000 -7,800
30,00,000 2,75,000 27,25,000 30,00,000 6,55,200 6,63,000 -7,800
32,50,000 2,75,000 29,75,000 32,50,000 7,33,200 7,41,000 -7,800
35,00,000 2,75,000 32,25,000 35,00,000 8,11,200 8,19,000 -7,800
37,50,000 2,75,000 34,75,000 37,50,000 8,89,200 8,97,000 -7,800
40,00,000 2,75,000 37,25,000 40,00,000 9,67,200 9,75,000 -7,800
42,50,000 2,75,000 39,75,000 42,50,000 10,45,200 10,53,000 -7,800
45,00,000 2,75,000 42,25,000 45,00,000 11,23,200 11,31,000 -7,800
47,50,000 2,75,000 44,75,000 47,50,000 12,01,200 12,09,000 -7,800
50,00,000 2,75,000 47,25,000 50,00,000 12,79,200 12,87,000 -7,800
1,00,00,000 2,75,000 97,25,000 1,00,00,000 31,23,120 31,31,700 -8,580
2,00,00,000 2,75,000 1,97,25,000 2,00,00,000 68,53,080 68,62,050 -8,970

All numbers in ` *We have assumed the following deductions: Standard deduction of `50,000; `1.5 lakh under Section 80C, `50,000 on
investment in NPS under Section 80CCD(1B); `25,000 on payment of health insurance premium under Secion 80D.

9 BUDGET & YOU

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