A tax expert lists out three questions one should ask before option for new income tax slabs
- India’s finance minister,
Nirmala Sitharaman, announced a new tax regime for individual taxpayers with lower tax rates.
- However, the new ‘optional’ regime only applies if you don’t claim any tax-saving exemptions.
- Archit Gupta, CEO and founder of ClearTax, shared three questions that you should ask yourself before switching from the old tax slabs.
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India’s finance minister Nirmala Sitharaman announced a new alternative ‘tax regime’ that puts more disposable income in the hands of taxpayers to stimulate the economy. However, it may not necessarily mean that you will pay less tax.
Archit Gupta, CEO of the tax filing platform Clear Tax says that this is a part of the government’s long-term plan to revoke tax exemptions from the 1950s and 60s.
He recommends asking yourself the following three questions before deciding to switch over from the current tax slabs.
Do you save enough money to invest?
If you’re not, this is for you. The new regime will leave you with more disposable income. It is helpful for those who are currently finding it difficult to match expenses under your current salary.
What exemptions are you currently utilising?
Whether or not switching between tax regimes is beneficial will vary from taxpayer to taxpayer. It depends on the exemptions and tax-saving instruments that an individual is already utilising. The new tax slabs are definitely beneficial for taxpayers who currently don’t claim any tax relief or whose companies’ don’t provide any tax saving options.
Some of the exemptions include tax saving on up to ₹1.5 lakh under 80(C) which includes investments in mutual funds and life insurance among other instruments, tax-saving on up to ₹2 lakh on home loan interest, ₹50,000 under the National Pension Scheme and medical insurance for parents.
Accounting for these exemptions, a person with income up to ₹15 lakh will have to pay ₹1,42,500 under the old tax regime. Under the new tax regime, the same taxpayers will have to pay ₹1,95,000.
However, if you don’t avail any tax saving options — you would be paying ₹2,73,000 subject to the old tax slabs.
AdvertisementAre looking for better investment options and more liberty with your money?
One of the main benefits of the new tax regime is that taxpayers will have money to invest in alternative investment schemes that may yield higher returns. It’s a boon for taxpayers who’re looking for more flexibility.
You'll save ₹78,000 more under new income tax slabs if you earn less than ₹15 lakh
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