In India we usually have 2 regimes, one is Old Income Tax Regime And one is Mew Income Tax Regime. The old tax regime is the from Old time, where you can save more Tax when your investments are more. Whereas in the new tax regime, there is no concept of investments and all, there is flat tax where there is tax bracket and if you fall on that tax bracket you have to pay that much tax.
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Now with the new tax regime, we don't have to show any documents and there is a flat tax structure. And all the new changes which is happening is happening in the new tax regime itself. The government wants everyone to be on New Tax Regime because in the Old there was a lot of loopholes and a lot of people used to take advantage of that loophole to save more tax. For example, I have seen my friends paying a huge rent to their parents to save the tax in the HRA. Next they used to pay some donations to political party and then get cash from them by paying like 10%. So they saved around 20% from this way, because 30% is the tax saved and payed 10% for conversion and thus saved 20%.
I have seen people literally paying 10 lakhs to the political parties to have huge tax. Now to control this loopholes, government is trying to have a flat structure where there is no loophole and you have to pay the tax based on the bracket you are in. I am on the new tax regime from the last 4 years because I don't have a huge rent, nor I pay to my parents, nor I have any political connections for the exchange. So eventually I pay the same tax in the new tax regime like the old tax regime.
The advantage of being in the new tax regime is that I don't have to get the documents to show, there is no scrutiny or other things, it is just simple tax paying structure. Now from next year it is again more good because there was huge tax cut too and thus we can save more. And that's why I am on New Tax Regime for a long time.
