• Old Regime vs New Regime for under construction property

I need to choose between the new tax regime and old tax regime for my individual ITR filing. I will save some ₹15k if choose the new tax regime right now this financial year. But I have been choosing old tax regime thinking my house loan will be starting this year for a property which is under construction which will probably be completed by Dec 2022. The amount of loan that I will be taking is around ₹30-40L for a property around ₹1.5Cr. Which tax regime should I choose considering benefits under Section 24 (₹1.5L in 80C is already maxed out, no additional benefit) under the assumption the new old tax regime is not going away? What are the chances that old tax regime will stay for the next 5 year so that I can avail the benefit?
Asked 1 month ago in Income Tax

Dear Sir,

 

Here is my reply to your query:

 

Considering  the facts mentioned by you that for FY 2020-21 you can save Rs.15K if you choose the new tax regime and your house property will be completed in the FY 2022-23 meaning thereby the benefit of interest on loan will be taken only from FY 2022-23, following are my suggestions:

 

1. For FY 2020-21 you can choose the new tax regime and save the tax as mentioned by you.

2. Once you received the possession of the house, you can then choose the old tax regime for that Financial year and take the benefit of interest on loan. 

Also, to clarify that old tax regime will end in the future but as of now there is no such prediction that when this will end or some other regime will come to replace this old regime.

 

Please Note: 

A salaried taxpayer can opt-in and opt-out every year. That means you can choose the new tax regime in one year and choose the regular tax regime in another year. A non-salaried taxpayer has to choose the new regime at the time of filing the tax return. They need not declare or intimate their choice to anyone at any time during the year. However, a non-salaried taxpayer cannot opt-in and opt-out of the new tax regime every year. Once a non-salaried opts out of the new tax regime, they cannot opt-in again for the new tax regime in the future.

 

Thanks and Regards 

Divya Chugh

Divya Chugh
CA, Noida
190 Answers
3 Consultations

5.0 on 5.0

Dear taxpayer,

You haven't disclosed the source of income and other ancillary facts in your query. The legal provisions regarding flexibility to choose one regime over the other and future repurcussions of such selection are different for persons having business and non business income. 

Therefore, it won't be prudent on my part to advise anything without having this crucial piece of information otherwise it may cause more harm than good. I would suggest you to share this information, may be on phone consultation if you find that more comfortable, to get accurate advisory. 

Lastly, it is not possible to comment on which regime would stay and for how much time. These are legislative decisions and can't be predicted accurately in advance. So my advice in this regard would be to choose your option wisely as per the existing framework only. 

Feel free to reach out to me in case of further queries.

 

Best Regards

Vikram Aggarwal
CA, Gurgaon
46 Answers
6 Consultations

5.0 on 5.0

Hello taxpayer,

Basis your response, I understand that you are not having any income from business or profession. So you have full flexibility to choose between the two regimes, basis your potential tax outgo, for each and every financial year. 

 

Best Regards

Vikram Aggarwal
CA, Gurgaon
46 Answers
6 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Salaried individuals are granted an option to choose between old and new scheme at the time of making their tax declaration to employer for the purpose of TDS. Having said that, even if any individual chooses one option at the time of making declaration to employer for TDS, he is free to change the option and select another one, at the time of filing the ITR. 

 

So, you can easily switch the option. There is no restrictions on the same.

 

We may assist you in proper tax planning & entire procedure. 

 

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
5113 Answers
161 Consultations

5.0 on 5.0

If you are planning a home loan and you already have investments of 1.5 lacs under 80C you should choose old tax regime.

There is an option to change from old to new and vice versa.

Ruchi Goel Anchal
CA, Gurgaon
457 Answers
5 Consultations

5.0 on 5.0

- As you have mentioned, you are having income from salary and prospective income from equity and RSUs which will be in then nature of capital gain income. Alternative tax regime is applicable only to individual/HUF and not to any other taxpayer (i.e. Company/LLP/Partnership firm). If an individual does not have income from business or profession then he can change the option each year.

- As you have not disclosed the structure of the salary, it is little bit difficult to advise you accurately but still I will try to answer your question to your satisfaction. Under Old regime, standard deduction of Rs.50k, 1.5 lacs deduction u/s 80C (already exhausted by you), might be there is HRA exemption, mediclaim/mediclaim expenditure deduction u/s 80D, deduction u/s 80TTA upto 10K. Assuming your salary is more than 15 lacs, if all the deductions/exemptions are more than Rs.2,50,000 it is better to avail old tax regime. As you mentioned there is tax saving of Rs.15k in new regime, might be you have missed some deduction/exemption. 

- Also if there will be any capital loss on sale of equity or any other loss, no carry forward and setoff of losses would be available.

- To avail the benefit of new regime, an individual/HUF is required to upload Form No.10-IE before the due date of filing of the ITR.

- Intimate the employer for availing new regime at the beginning of the year otherwise employer would deduct TDS under old regime. Intimation can not be modified during the year. It is an intimation and not an option. Option will be exercised at the time of filing of ITR.

 

For more information, you can visit website www.taxclique.com

 

For detailed discussion, please tale phone consultation.

Vivek Kumar Arora
CA, Delhi
4135 Answers
365 Consultations

5.0 on 5.0

Dear Sir,

 

Yes you can choose the new or old tax regime every year by declaring the same to your employer at the beginning of the financial year.

 

Thank!

Divya Chugh

Divya Chugh
CA, Noida
190 Answers
3 Consultations

5.0 on 5.0

Hi,

 

I am little confused as to why are you worried about choosing old versus new tax regime for next 5 years. You can always evaluate both the regimes in that particular year and decide which is beneficial for you.

 

There is no bar in switching from old regime to new regime and vice -e-versa.

Lakshita Bhandari
CA, Mumbai
5514 Answers
594 Consultations

5.0 on 5.0

If your construction will complete in 2022-23 financial year then you will get benefit of home loan interest in that year and you can opt in for new regime in that year itself if you get more benefit.

You can read more on same at: https://www.taxontips.com/comparison-between-new-tax-regime-i-e-section-115bac-and-old-tax-regime-under-income-tax-income-head-wise-comparison/

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement. You can even book phone consultation for further personal assistance.

Thank you.

Naman Maloo
CA, Jaipur
3829 Answers
47 Consultations

5.0 on 5.0

Hi. Thanks for the question. Let me answer

By opting for new regime, you will be forced to give away the deductions such as LFA u/s 10(5), HRA exemption u/s 10(13A), other allowances for performance of duties u/s 10(14), standard deduction of 50000, 
Then, as you mention that the construction will complete within 5 years of loan, the deduction u/s 24(b) will be 200000 pa, and this will also have to be forgone.
Further, all deductions u/s Chapter VI-A except 80CCD (2), and 80JJAA will also not be available.

And if you are a government employee, you may claim exemption on entertainment allowance as well.

The net benefit of opting for new regime according to me is Nil. I have made some scenarios for you to compare the old vs new regime:-

First of all, the absolute deductions, such as standard deduction of 50000, interest on loan on house property Rs.200000, and 80C deductions 150000, which are available in the old regime are not available in new. Apart from these, LFA, HRA, and other allowances are exempt upto certain limits. For simplicity, I have considered only the absolute deductions in my calculation, ie, deduction of 400000 from your gross income.

Income & Tax under old, under new

(I have ignored surcharge and 4% health cess)

Income 500000 - Tax; new 0, old 0

Income 750000 - Tax; new 37500, old 0

1000000 - new 75000, old 32500

1250000 - new 125000, old 82500

1500000 - new 187500, old 142500

3000000 - new 637500, old 592500

5000000 - new 1237500, old 1192500

7500000 - new 1987500, old 1942500

 

Finally, as per section 115BAC, if you do not meet the conditions, old regime will automatically become applicable for the relevant PY. So, you can switch between old and new in any previous years. There is no restriction if you do not have business income.

 

Thanks. Pl seek any clarification.

Siddharthh Jain
CA, Gurgaon
50 Answers
1 Consultation

5.0 on 5.0

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