As the new financial year onsets, salaried employees must choose between the old and new tax regimes. This decision determines how much income the employer will deduct from their monthly salary.
So, if you’re struggling to choose between the two, we have done a comparison of old and new tax regime for your ease. Keep reading to find out why it is important to choose a tax regime.
Let’s see the key three aspects in which the old and new tax regimes differ.
If you’ve still not decided which tax regime to choose, it's time you do so. Here are five vital reasons to pick up your pace and choose between the two regimes.
Since the new tax regime has been declared the default choice, your employer will deduct your salary as per the new regime. In such a case, the employer will not consider the exemptions and deductions available under the old regime.
While employees can change the tax regime at the time of ITR filing, not informing the employer about the choice in April can cause some issues. For instance, if you haven’t selected the old regime at the start of the financial year, then at ITR filing, you will not be able to claim deductions such as HRA or LTR.
The Income Tax Department allows an employee to choose his/her tax regime only once in a financial year. The employee does not have a choice to change it after that.
Employees who wish to benefit from deductions and claims available under the old regime, such as HRA, LTR, Under Sections 80C, etc., do have to inform the employer about the choice at the start of the financial year.
Finally, it is important to choose on time because the tax regime selected will decide how much tax is deducted from your salary. Inadequate planning can increase the TDS from your salary income, minimizing your take-home pay.
When it comes to how to choose between old and new tax regime, you can use the Income Tax Calculator to find out the tax payable under both regimes and make the choice. While you’re doing so, do take a look at Fi Analyzer, which track your expenses and spending to help you make better choices for maximizing your savings.
It is a good choice for those with an income under INR 7,00,000 lakh. Those with higher incomes who cannot claim many exemptions under sections 80C or 80D can further opt for the new regime.
You must file Form 10IE if you opt for a new tax regime and have income under the Head "Profits and Gains of Business and Profession."