The New Tax Regime Was Introduced In Budget 2022 And Has Been Implemented By Default From This Financial Year. Later, The CBDT Issued An Order To The Employers Saying That It Would Be Up To The Company To Ask Their Employees Which System They Want To Live In. In Such A Situation, To Take Full Advantage Of Tax Deductions, The Employees Have To Understand Which System Will Be Right For Them.
Before Choosing Any Tax Regime, New Or Old, It Is Necessary To Consider Some Important Things, So That The Taxpayer Can Take The Right Decision. These Important Things Can Be Understood From The 5 Points Given Below.
- Understand Tax Slabs
Estimate Your Exact Income Before Opting For The New Or Old Tax Regime. According To Experts, If The Annual Income Of The Taxpayer Is Up To Rs 15 Lakh Or Less And If The Taxpayer Has Not Made Any Investment, Then The New System Will Be Good For Him. Under The New Tax Regime, A Tax Of 20% Is Levied, Whereas, Under The Old Regime, 25% Would Have To Be Paid.
- Important Things For Investors
If You Are A Taxpayer Who Has Invested In Many Schemes Like Life Insurance, Health Insurance, and Pension Plans. Also, If You Are Paying The Premium For Home Loan Or Similar Loans, Then Opt For The Old Tax Regime.
This Is Because, Under The New System, Taxpayers Will Not Be Able To Claim Any Deduction Under Section 80C Of The Income Tax Act. In This Case, He Will Have To Bear A Loss Of Rs 1.50 Lakh And Will Only Be Able To Get A Rebate Of Rs 50,000 In The Form Of a Standard Deduction.
- This Is Necessary For HRA And TLA
If The Taxpayer Lives In A Rented House Or Has A Traveling Job, He Gets Rebates Like House Rent Allowance (HRA) And Leave Travel Allowance (LTA) Which Are Tax-Free. In Such A Situation, If This Amount Is More, Then Continue In The Old System, Because In The New System, It Does Not Get Its Benefit.
- Option To Change
In The Beginning, If It Is Not Understood That Which System Will Be Correct, Then It Is Better To Remain In The Old One Because It Can Go To The New System Later In The Financial Year, But If The Taxpayer Once Opts For The New Tax System If Yes, Then It Is Not Possible To Go Back To The Old Tax Regime.
- Compare Both The Systems
If You Have Prepared The Details Of All Your Income And Expenditure, Then In The End The Right Decision Can Be Taken By Comparing Both The Arrangements. The Income Tax Department’s Site Provides An Income Tax Calculator, Which Can Be Used To Determine The Most Appropriate Tax Regime Based On Income And Deductions.
(Note: This Article Is Based On A General Information. Taxpayers Must Take Expert Advice Before Choosing Any Arrangement.)
