InvestorQ : Can you please tell me what is this dual tax regime and how to select the right tax regime for my sake?
Arya Nanda made post

Can you please tell me what is this dual tax regime and how to select the right tax regime for my sake?

Answer
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Deepa Salunkhe answered.
7 months ago


To understand about the dual tax regime, let us first look at how this budget impacts the personal finances of people in terms of taxation.

One of the big announcements of the Union Budget 2020 was the introduction of the dual tax regime. Investors will have the leeway to select the tax regime that suits them best. Here are some of the major changes on the tax front.

Let us talk about the dual tax regime first. Essentially, taxpayers will now have two choices. They can opt for lower rates and forgo exemptions or they can keep the exemptions and continue with the existing rates. In the new regime, the government has reduced the number of exemptions from 100 to 30. The slabs have also been broken up in a more granular manner and the benefit of the new regime extends till the time your income is below Rs.15 lakhs per year. Beyond that level, the rates off tax remain the same. You need to opt for the appropriate regime of taxation. You need to opt for the system that makes most economic sense to you.

The question is should you forgo exemptions? The new system will entail that you give up on most of your regular exemptions like Section 80C, 80D, Section 24 and a host of others. While CPF, gratuity and retrenchment compensation will be on, there will be no additional benefits in the new regime including HRA, standard deduction and other allowances. In fact, even the tuition fees paid by you for the education of your children will not be admissible any longer. Of course, you have the choice of shifting to the new regime at a subsequent date too. SO you need to make a tax *** investment *** wealth creation choice.