Should you opt for the new or old income tax regime?
How should I decide which is a better tax regime for me—old or new tax regime? What deductions will I get in old regime and what will I stand to lose in the new tax regime? —Name withheld on request There are merits and demerits of both the old and new tax regime. From the ongoing financial year (FY) 2023-24, the new tax regime is the default regime.
Taxpayers may opt for the old tax regime if the same is beneficial. The following changes were made in the new regime from FY2023-24: The basic exemption limit has been increased to ₹3 lakh from ₹2.5 lakh; standard deduction of ₹50,000 for salaried taxpayers will also apply in the new regime; there will be rebate on income earned up to ₹7 lakh However, taxpayers earning above ₹7 lakh have to decide between the two regimes after computing the tax liability under both.
Under the old tax regime, the tax rates are higher, however, certain exemption for allowances like house rent allowance (HRA), leave travel allowance (LTA) are allowed. Also, certain deductions are allowed for investments in equity linked saving schemes, Public Provident Fund (PPF), interest on housing loan, interest on education loan, premium paid for medical insurance, etc.
It is important to analyse the impact of deductions/exemptions to be claimed vis-à-vis the benefit of lower tax rates in new tax regime. In the case of taxpayers with income from a business or profession, once the option to avail new tax rates has been exercised, the new rates shall apply for subsequent years and one single option of switching back to the old tax regime would be available.
For taxpayers, who don’t not have business or professional income, the selection can be made every year. The bottom line is taxpayers need to analyse
. Read more on livemint.com
