DON'T RETIRE RICH

Wednesday, 1 February 2023

NEW TAX REGIME OR OLD TAX REGIME ?

Greetings,

Now that the Union Budget 2023 presentation is over….the various images and posts that get shared on Whatsapp University should be confusing you a lot. Isn't it
I thought why not add my own views, version, and opinion and make you more confused!!

Ha ha… oops… give you MORE CLARITY and help you plan better

Disclaimer: I am not a Certified Tax Planner and you are better off consulting your CA before filing your Taxes

 

So…. Lets deep dive

 

THE MAIN HIGHLIGHTS WHICH AFFECT YOU AND ME
1. Minimum Tax Exemption raised to Rs.7 lakhs in the New Tax Regime

2. The Senior Citizen Savings Scheme limit is doubled from 15 lakhs to 30 lakhs

3. Post office MIS scheme increased to 9 lakhs per individual from the Existing 4.5 lakhs and for JOINT from 9 lakhs to 15 lakhs

4. For women folk, a NEW Small Savings Scheme has been introduced. Rs.2 lakh max can be invested earning an interest of 7.5% per annum

5. Surcharge at the highest rate is reduced from 37% to 25%

6. Overseas remittance above 7 lakhs TCS (Tax Collected at Source) increased from 5% to 20%

7. Income recd from Insurance Policies (Traditional policies) where the premium paid is above 5 lakhs WILL NO LONGER BE EXEMPT FROM TAXES

Income from traditional insurance policies where the premium is over Rs 5 lakh will no more be exempt from taxes

 

WHO GAINS?


1.
Senior Citizens gain hugely in this budget

With the Senior Citizen Savings Scheme limit doubled from 15 lakhs to 30 lakhs, they have a much bigger basket to route their money into a Guaranteed Safe scheme

In fact,

Married Senior Citizen Couples can now together invest up to:

- Rs 60 lakh in Senior Citizen Savings Scheme (SCSS)

- Rs 15 lakh in Post Office – Monthly Income Scheme (PO-MIS)

- Rs 30 lakh in PMVVY (7.4% interest and runs for a period of 10 years)

SCSS is truly attractive with 8% interest rate and that too payable quarterly. SCSS is for a period of 5 years and can be extended by 3 years.

PO-MIS pays 7.1% interest and must be considered only after options are exhausted

The Senior Citizen's Pensioners have been given the benefit of Standard Deduction even in the New Tax Regime!

 


2. ULTRA HNIs
Yes...The rich will get richer!!

Due to the surcharge reduction from 37% to 25,  the net effective tax rate comes down from 42.74% to 39% thus for someone earning about 5 CRORES the saving will be as high 20 lakhs per annum !

 

 

3. WOMEN FOLK
With a new instrument named MAHILA SAMMAN SAVING CERTIFICATE introduced, women can now deposit Rs.2 lakhs at a fixed rate of 7.5% interest for a period of 2 years.
Definitely better than an FD and moreover it's guaranteed by the Government!

Sukanya Samruddhi Scheme continues but it's locked and one can invest only up to 15 years of a girl child’s age. This MSSC can be a good alternative as a partial withdrawal option is there

 

LOSERS

 

1.       Individual earning less than 8 lakhs and using a host of deductions u/s 80c, 80D, and having a Home Loan loses a lot as he has nothing offered either in terms of rebates or exemption.

2.       Going on a Foreign Tour? Be ready to shell out more. Yes.. earlier you were paying 5% TCS (Tax Collected at Source) and now this has been increased to 20%. BTW, you can claim the TCS credit while filing your Tax return but yes your money GOES out of your bank and you need to wait till you pay taxes

 

 

VERY IMPORTANT:
 
Up to 7 lakhs exemption in NEW TAX REGIME does not mean you pay only 10% after 7 lakhs… no…

For income upto Rs.6,99,000 it NIL

But once you touch Rs.7,00,000 it's calculated as follows

0 to 3 lakhs = NIL

3 lakhs to 6 lakhs =5% which means 5% * 3 lakhs = Rs.15,000

6 lakhs to 7 lakhs = 10% which means 10% * 1 lakh = Rs.10,000

Thus Rs.15,000 + Rs.10,000 so you are paying Rs.25,000 on an income of Rs.7 lakhs

 

 


NEW TAX REGIME OR 

OLD TAX REGIME?:


On the face of it the NEW TAX REGIME looks beneficial but deeper analysis tells a different story, especially for those earning less than Rs.10 lakhs per annum

 In fact, when we dig deeper, Rs.15.5 lakhs is the BREAK-EVEN




 

The NEW Tax Regime is easy to calculate due to no deductions and exemptions to be calculated and thus gives the feeling of having MORE in hand

but due to this FEELING OF HAVING MORE, the tendency to SPEND will definitely rise and thus a Financial Expert is a MUST.




An AMG (Advisor/Mentor/Guide) will ensure that you also THINK AND PLAN for your future financial obligations be it your Children's Education, your Own Retirement

Under the Old Tax Regime, you were sort of FORCED to save by investing in schemes/plans of 80C and thus at least some part of your future financial obligations were taken care of by default but the New Tax Regime sort of makes you feel like a FREE BIRD and thus your Future Financial Security depends now on your BEHAVIOUR!!

 


 

Before thinking of switching to a NEW TAX regime

note that the new tax regime will not give you the benefit of deductions  under

Section 80c, 80D

and also not benefit of Housing Loan Interest besides the HRA benefit

Old Tax Regime still looks attractive to the majority of people especially if your earning is less than 10 lakhs

Of course... do consult your CA for the final assessment

#DontRetireRich #WealthOfWisdom

 

I have shared some Options both with and without deductions 
(created by our dear friend Ramesh Bhat of Aniram, Chennai) 

Go through the same and you will get a clear idea of what to choose


All the very best

Srikanth Matrubai







 






All the best,
Regards,
Srikanth Matrubai
MUTUAL FUND DISTRIBUTOR
REBALANCE VOLATILITY CERTIFIED COACH
Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH


You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

 
Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

Do read the book and give your valuable feedback and request you to post positive comments on Amazon. https://amzn.to/3cHUM6M/ 

You can purchase the book on Amazon and Flipkart 

For the best of ideas on where to invest to create Mountains of Wealth 
join my TELEGRAM channel
WEALTH ARCHITECT
    https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/

BOOKS BY AUTHOR

Recent Most Popular Posts

NEW TAX REGIME OR OLD TAX REGIME ?

Greetings, Now that the Union Budget 2023 presentation is over….the various images and posts that get shared on Whatsapp University should...