Employees can choose between old and new tax regimes once a year. However, you will need to recalculate your tax credits and deductibles. Imagine this. You filed your tax return and realized that you would pay less tax if you chose the old tax system instead of the new one, or vice versa.
If you are employed, you can change your tax regime when you file your tax return. But if you run a company or are self-employed, you only get to change once in your life. The Income Tax Portal has calculators you can use to weigh your options. Alternatively, you can have a CPA examine your income, savings and spending patterns to help you choose the right plan.
The new tax regime will impose low rates of 10% (annual income of Rs.500-7.5 million) and 15% (annual income of Rs.7.5-10 million). These tax classes do not exist in the old tax system.
Low tax rates do not have deductions or benefits to reduce taxes. There are 70 types of expenses and investments that are not eligible for deductions or exemptions under the new tax regime. The new tax system offers lower tax rates at the cost of easier compliance. Even if you find the old system more tax-friendly when you file your tax returns, if you incur costs for rent, loan payments, medical insurance, treatment for people with disabilities, or fighting certain illnesses. can claim the deduction. Investing in provident funds, tax-saving fixed deposits, or tax-saving investment funds can also help you apply for an exemption.
“Before filing a tax return, we check each individual’s tax liability under both regimes. If individuals save tax, there is no harm in changing the tax regime,” he said. said Sudhir Kaushik, co-founder of TaxSpanner.com.
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