A big question was revolving in the minds of crores of taxpayers filing Income Tax Returns (ITR) for a long time… Is the government going to completely abolish the old tax regime? If you too are dependent on the old system to save tax through savings like home loan, insurance and PPF, then there is good news for you. The Central Board of Direct Taxes (CBDT) has made it clear that the old tax system is not going anywhere at the moment.
CBDT Chairman Ravi Aggarwal has clarified that even though most people are adopting the new tax regime, the government has no intention of bringing any 'sunset clause' to stop the old system.
According to a report in Times of India, the CBDT Chairman admitted that the new tax regime has been welcomed by the taxpayers. Statistics show that about 88 percent individual taxpayers are now filing their returns under the new system. This is a huge change. But, despite this, Ravi Aggarwal assured that taxpayers will still have the freedom to choose either of the two options. The government believes that the transition is positive, but there is no plan to impose any system by force.
When 88% people have moved to the new system, who needs the old system? Tax experts believe that the old system is still a profitable deal for millions of people. According to Sachin Garg, partner, Nangia & Company LLP, it would be premature to remove it immediately. Chartered Accountant (Dr.) Suresh Surana says that this system is no less than a lifesaver for those who have large home loans or who avail the benefits of HRA and LTA in their salary structure.
If you invest in PF, PPF, life insurance under Section 80C, or avail exemption on home loan interest under Section 24(b), then if tax is calculated in the old system, you may have to pay less tax than the new system. It is best suited for those who follow financial discipline and invest for the long term.
Even though the benefit of deductions is available in the old system, there are solid reasons behind the increasing popularity of the new tax system. Shubham Jain, Director of SVAS Business Advisors, says that the old system is now gradually becoming a 'transitional' option.
The new system is perfect for those youth and newly employed people who do not want to get entangled in the mathematics of collecting investment documents and saving tax. In the new regime, the tax slab rates are lower and the basic exemption limit is higher. For those who do not have any home loan or who do not make huge investments, the tax burden in the new system is much less and filing returns is also very easy.
Experts believe that instead of shutting down the old system in one fell swoop, the government will let it die its own death. As people's old home loans end and their investment patterns change, the need for the old system will automatically reduce. Shubham Jain says that this will be a natural process. As debt responsibilities reduce and the new generation joins the workforce, the economic relevance of the old regime will wane. But until this happens, the government does not want to disappoint those who have done their entire financial planning according to the old system.
