After the Budget 2020 proposals on the simplification of personal income tax, the comparison of the old tax regime with the new tax regime has become the talk of the town. To help taxpayers make an informed decision, the income tax department has an e-calculator on its e-filing website. The new tax regime has lower income tax rates but without any income tax exemptions and deductions. Although a new tax regime is still an option for FY 2020-21, it may become the only option available to taxpayers, as and when the government wants it in the future. As of now, as a taxpayer, one wants to know whether to stick with old or existing regime makes sense or opting for the new regime is better.

How to use the e-calculator

  • Visit the e-filing website of income department.
  • Click on ‘Tax Calculator FY 2020-21
  • On the next page, choose your age from the dropdown
  • Enter your Estimated Annual Income which is your gross income from all sources
  • Then, enter Exemptions / Deductions that you may avail next FY.
  • Submit by clicking ‘ Compare tax under existing and new regime’ button

The results will show –

  • Tax Payable as per Old Regime
  • Tax Payable as per Old Regime
  • Your Tax Outflow is same in both Old & New Regime
  • Tax Benefit as per New Regime
  • Tax Benefit as per Old Regime

The government’s e-calculator comes with the following disclaimer:

  • This calculator is only meant to provide a basic idea of the estimated impact of the new provisions. For the actual provisions and eligibility, one has to refer to the Income Tax Provisions.
  • All tax calculations (includes cess) are excluding Surcharge & Total Eligible Exemptions / Deductions are assumed to be Zero in New Regime.
  • Estimated Annual Income is not applicable for any Income with special rates
  • Deductions and Exemptions eligible as per Old regime

Before making a comparison and taking a call related to your savings, make sure you have a proper financial plan in place. Savings in taxes, if any, need to be properly allocated towards long term goals.