Calculate tax paypal by an individual who is ordinary resident in Indi...
Tax Calculation under Old Regime
In the previous year 2020, the individual's income sources and calculations under the old tax regime are as follows:
- **Total Income:**
- Agricultural Income: ₹25,000
- Other Income: ₹16,00,000
- Agricultural Income: ₹20,000
- Total Income = ₹16,00,000 + ₹25,000 + ₹20,000 = ₹16,45,000
- **Agricultural Loss:**
- Absorbed Agricultural Loss: ₹7,000
- Net Taxable Income = ₹16,45,000 - ₹7,000 = ₹16,38,000
Tax Calculation under New Regime
If the individual opts for the new tax regime, the following points apply:
- **New Tax Regime:**
- The new regime offers lower tax rates but does not allow many deductions.
- Agricultural Income is exempt and does not affect tax slabs.
- **Taxable Income Calculation:**
- Total Taxable Income = ₹16,00,000 (as agricultural income is exempt)
Comparison of Tax Benefits
- **Old Regime Benefits:**
- Deductions allowed on various investments and expenses.
- Absorbed agricultural losses can be set off against other income.
- **New Regime Benefits:**
- Lower tax rates but limited deductions.
- For income above ₹15,00,000, the tax rate is 30%, without the benefit of deductions.
Conclusion
- **Tax Impact:**
- Under the old regime, the individual has a higher taxable income due to deductions but can benefit from the exemptions and lower effective tax with various deductions.
- The new regime simplifies tax calculation with lower rates but offers limited deductions.
- **Recommendation:**
- Evaluate the total tax outflow under both regimes, considering the individual’s investment habits and future planning. If deductions are significant, sticking to the old regime may be beneficial.