Should I opt for a new tax regime? How to decide?
Sadhana, New Delhi
Reply by Sujit Bangar, Founder Taxbuddy.com
The first step of tax planning should be analysing how much tax I have already saved! This is important because in the regular course of life, we do many things like kids' education, insuring life and health and buying a home without knowing its tax saving consequences.
Second step should be to ascertain how much space is there for me for further investment for tax saving.
Once you know how much tax you have already saved, you are aware how much of the Rs 1.5 lakh bracket is still available for further investment.
And then third step can be to look for good investment option. While doing so , one should ensure identifying options as per his/her life goals and risk appetite.
In the nutshell, tax planning should be looked into in totality. This will ensure minimum tax outgo, secure life and health and wealth creation together.
From last two years, a new tax regime has been in place. The old tax regime has various deductions to save tax. The new tax regime is without any deduction. One can avail lower rates of the new tax regime and cannot claim any deduction further to save tax. This is useful mostly for those who wish to have more disposable cash in hand.
I feel that taxpayers now have more options. If the taxpayer doesn't want to spend cash on tax saving investments, then one can go for a new tax regime.
If somebody wants to do full scale tax planning along with wealth creation, one has the option to go for the old tax regime.
If you are a salaried person, please inform your employer if you wish to opt for the old tax regime. This will help your employer to plan TDS accordingly. Remember you can still change tax regime while filing income tax return.
If you have income from business, you need to be very cautious while choosing a tax regime and it can't be changed later.
(Views expressed by the tax expert are his/her own.)