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Old vs New Tax Regima

Ankit Saxena (1 Points)

24 April 2021

How to select tax regime (old or new?) if salary is greater than 14 LPA

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CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 24 April 2021

Steps to opt for your preferred Tax Regime:

Step 1: Understand what suits you best

If your taxable income is below 5 lakhs or above 15 lakhs, then tax rates are same in both; hence the older regime that allows exemptions is more suited

Step 2: Check the exemptions

Out of all the exemptions that have been removed, check how many are applicable for you and how much money you can save by opting for those. This will help you in the next step.

Step 3: Do the Math

Based on your net taxable income post exemptions/deductions, calculate total income tax under old as well as new regime.

Step 4: Go beyond the numbers

Apart from taxable income, your lifestyle, life stage, short- and long-term priorities along with financial goals are excellent parameters to decide what type of tax regime you should opt for. With inflation, rising consumerism and growing needs, it’s important to start saving early and spend smart. The power of compounding has a great role to play in achieving your financial goals.

Step 5: Remember to plan well

It’s important to note that it is possible to change tax regimes every financial year, as both will exist simultaneously. First – time taxpayers may decide to choose the new tax regime as it’s simple to follow and translates to lower tax liability. However, in the long run, investments have financial benefits and taxpayers will want to go for the old regime as that will be more beneficial.

The current budget announcement has gone the extra mile to provide ample freedom of choice to each salaried individual. It’s best to understand every variable as you go along this checklist before making the switch. Freedom is yours, use it wisely.