Old vs New Tax Regime: Read what expert says about picking suitable tax regime for you
What to pick, the old or the new tax regime? This questions bothers a lot of taxpayers whether they are new or old. While selecting the right tax regime depends on your income bracket and tax deductions that you can avail under different sections of the Income Tax Act, it is always good to do some due diligence or take expert advice. In this write-up, we tell you what Bankbazaar.com CEO Adhil Shetty says about picking the suitable tax regime.
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11:39 PM IST
New vs Old Tax Regime: Tax regime is one topic an average taxpayer places emphasis on only during the income tax return filing when they have to pick between the old and new tax regimes.
Though new taxpayers have no option but to pick the new tax regime, the general consensus is that if you are in a higher salary bracket and have investments under tax saving-related sections of the income Tax Act, the old tax regime can be more suitable to you.
However, if you have no investments, you may opt for the new tax regime.
There are many tax calculators available online, but still, the majority of people approach tax experts for take a call on the suitable tax regime.
For an average taxpayer or a first-time taxpayer, the question of selecting between the old and the new tax regime remains tough task.
To make the puzzle a easier for taxpayers, Bankbazaar.com CEO Adhil Shetty has come up with an advice of selecting the right tax regime based on your income bracket and tax investments. He also gives a tax deduction magic number that can help you pick the suitable tax regime.
He suggests taxpayers pick the new tax regime if their earnings are less than Rs 7.5 lakh or more than Rs 5.04 crore a year.
"If you earn less than ₹7.5 lakh or more than ₹5.04 crore, the new tax regime seems better for you. But everyone in between those two numbers must calculate and determine what's best for them," he wrote in a LinkedIn post a day after Finance Minister Nirmala Sitharaman made no changes in income tax slabs.
He revealed the magic number of the Rs 4.24 lakh as deductions, and says that a deduction this big helps one break even under both regimes.
"If you can't get a deduction this big, go for the new regime. If you can, pick the old regime."
He has given four income scenarios, accommodated tax deductions in his calculations, and advised taxpayers to select between the old and the new.
In Scenario 1, he says that if a taxpayer's income is up to Rs 7.5 lakh and, after deductions, their income is Rs 5 lakh or less, they can go for the old tax regime, or else they can pick the new one.
In Scenario 2, if a taxpayer's income is more than Rs 7.50 lakh and up to Rs 14.17 lakh, and if they can claim deductions of 30 per cent or more, they can go for the old tax regime, or else they can pick the new regime.
In Scenario 3, if the taxpayer's income is more than Rs 14.17 lakh and up to Rs 5.0425 crore and they also claim deductions greater than Rs 4.25 lakh, they can choose the old tax regime; otherwise, they can pick the new tax regime.
In Scenario 4, if the taxpayer's income is more than Rs 5.0425 crore, and they avail all the tax deductions possible, they can pick the old tax regime, or they may choose the new one.
(DISCLAIMER: The views and tips are expressed by the expert. These are not zeebiz.com views. Zeebiz.com advises users to check with certified experts before taking any tax decisions.)
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