Is the brand new tax regime appropriate for late tax planners

Are you waking as much as tax planning now that the deadline is nearly over? Cannot resolve which funding to make? Or do you not have sufficient surplus to take a position that may assist minimize your tax invoice? The brand new tax regime could also be your greatest wager to scale back this yr’s tax outgo.

Launched in 2020, the brand new tax regime comes with the next tax slab at decrease charges than the previous regime (see desk) however, on the identical time, does away with all main tax breaks.

Praleen Bajpai says, “For somebody who has delayed tax planning until the final minute, they need to calculate their tax outgo underneath the decrease tax charges of the brand new regime and never simply to satisfy the necessities of the present monetary yr. One ought to select investments for tax breaks in a rush.” , Founder, Finfix.

“It’s higher to pay some tax underneath the brand new regime than lock a lump sum in an funding that’s not consistent with your monetary objectives to save lots of tax this yr.”

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Notice down all tax-saving investments and bills made to date together with dwelling and schooling loans, insurance coverage premiums, stamp responsibility and registration charges for property purchases, youngsters’s tuition charges, and so on.

Subtract these out of your complete earnings to reach at web taxable earnings and calculate the tax you may must pay on it.

Now, calculate your tax legal responsibility underneath the brand new tax regime wherein you need to waive many of the tax exemptions. Relying on the quantity of tax outgo underneath each the choices, you’ll be able to resolve.

The brand new tax regime additionally gives tax breaks on sure investments, which embrace deduction on employer’s contribution to the worker’s Nationwide Pension Scheme (NPS) account, exemption on maturity earnings from life insurance coverage insurance policies, PPF, Sukanya Samriddhi Yojana account, and so on.

Notice that salaried taxpayers have the choice to modify between the 2 regimes each monetary yr, however these with enterprise earnings or occupation earnings can change again to the previous regime after choosing the brand new regime solely as soon as of their lifetime .

Earnings from freelance stints and derivatives buying and selling additionally qualifies as enterprise earnings, so salaried people could be thought-about people with enterprise earnings for tax submitting and wouldn’t have the choice to maneuver between the 2 tax regimes.

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