Tushar works for a private limited company and he had opted for the old regime at the time of declaration to his employer as he had Mediclaim deduction for himself and family. While filing his ITR he was very sure that that would be the beneficial regime. But dividend income was a surprise element he had not planned for in his tax outflow and hence it resulted in additional tax liability. He has been assuming so far that if one claims deductions, then the old regime is beneficial. What went wrong?
Choice of regime cannot be generalized as it is a number game and varies from one tax payer to another. Although people suggest a mathematical formula for arriving at a beneficial regime, it seldom works in reality as it is purely based on the circumstances of the assessee.
Let’s take some numbers in Tushar’s case for a better understanding:
| DETAILS | OLD | NEW |
| Salary | 24,50,000 | 24,50,000 |
| Less: Standard Dedn & PT | (52,500) | 0 |
| Income from salaries | 23,97,500 | 24,50,000 |
| Dividend | 45,000 | 45,000 |
| Bank Interest | 3,000 | 3,000 |
| Gross Total Income | 24,45,500 | 24,98,000 |
| Less: 80D Mediclaim | (67,480) | 0 |
| Less: 80C – EPF Contn. | (95,000) | 0 |
| Less: 80CCD – NPS | (77,760) | (77,760) |
| Total Income | 22,02,260 | 24,20,240 |
| Tax (incl cess) on Total Income | 4,92,105 | 4,82,115 |
| Less: TDS | (4,83,091) | (4,83,091) |
| Balance Tax payable / (Refund due) | 9,014 | (976) |
Food for thought:
It may not be wise to “Follow the crowd” and make decisions as critical as your tax returns. While filing ITR 1 is considered super easy “at the click of a button”, one must understand that doing that may have led Tushar to shell out additional amount towards income taxes !
How can we help you?
Various clauses from the Income Tax Act may be simplified in online contents. But most of the time, it requires professional help in identifying suitable route for specific instances. Similar to nurturing and taking care of personal health, it is important to also keep a tab on one’s financial health. We at Chockalingam Unnamalai & Associates, can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.
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