How ought to I determine which is a greater tax regime for me—outdated or new tax regime? What deductions will I get in outdated regime and what’s going to I stand to lose within the new tax regime?
—Name withheld on request
There are deserves and demerits of each the outdated and new tax regime. From the continuing monetary 12 months (FY) 2023-24, the brand new tax regime is the default regime. Taxpayers might go for the outdated tax regime if the identical is helpful. The following adjustments had been made within the new regime from FY2023-24:
The fundamental exemption restrict has been elevated to ₹3 lakh from ₹2.5 lakh; commonplace deduction of ₹50,000 for salaried taxpayers will even apply within the new regime; there might be rebate on revenue earned as much as ₹7 lakh
However, taxpayers incomes above ₹7 lakh need to determine between the 2 regimes after computing the tax legal responsibility beneath each. Under the outdated tax regime, the tax charges are increased, nevertheless, sure exemption for allowances like home hire allowance (HRA), go away journey allowance (LTA) are allowed. Also, sure deductions are allowed for investments in fairness linked saving schemes, Public Provident Fund (PPF), curiosity on housing mortgage, curiosity on schooling mortgage, premium paid for medical insurance coverage, and many others. It is necessary to analyse the influence of deductions/exemptions to be claimed vis-à-vis the advantage of decrease tax charges in new tax regime.
In the case of taxpayers with revenue from a enterprise or occupation, as soon as the choice to avail new tax charges has been exercised, the brand new charges shall apply for subsequent years and one single possibility of switching again to the outdated tax regime can be out there. For taxpayers, who don’t not have enterprise or skilled revenue, the choice might be made yearly.
The backside line is taxpayers have to analyse the useful regime by computing last tax legal responsibility after bearing in mind the advantage of deductions and exemptions. Seeking skilled steerage on this evaluation may also help guarantee higher tax planning.
Aditya Goyal is a Bengaluru-based chartered accountant.
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Updated: 16 Aug 2023, 10:56 PM IST
