Confused about which income tax regime to choose? Here are key things to look at

Only a few days are left to intimate your employers about the income tax regime choice. However, several salaried employees still seem to be confused about choosing between the new and old tax regimes. “It is imperative for every employee to inform their employer of their chosen tax regime for this Financial year, i.e., 2023-2024, beforehand. Depending on the regime selection, the correct amount of tax will be deducted, and necessary adjustments will be made to the salary. It is essential to make this decision with utmost care to avoid excessive deductions,” said Abhishek Soni, Co-founder & CEO of Tax2win, a Fisdom company.

Before choosing a tax structure, there are a few things to consider:

Level of income

The individual needs to verify his overall income. He should assess the amount of tax savings investments he has made as well. 

HRA exemption 

Before choosing a income tax regime, one should also take into account the availability of HRA advantages and carryover losses.

According to Archit Gupta, Founder, and CEO, of Clear, those claiming HRA and other tax benefits would likely benefit from being in the old regime.

Vinit Khandare, CEO and Founder, MyFundBazaar said that each tax system, including the new one created under Section 115BAC of the IT Act, has advantages and disadvantages.

“The taxpayer's decision to select one of these tax regimes would typically be influenced by several variables, including investment goals and objectives, income levels, applicable tax rates, exemptions and deductions that are available, etc. So, before choosing between the two tax regimes, a thorough comparison evaluation and assessment must be done,” said Vinit Khandare.

Income tax calculator for choosing tax regime

The regime should be chosen after considering various factors such as income level, applicable tax rates, and tax-saving investments made. A detailed comparison and study of both regimes are also necessary. An income tax calculator can be a useful tool to make an informed decision and determine the most suitable tax regime depending upon your income and deductions, said Abhishek Soni.

Who will benefit from the new tax regime?

According to Clear Founder Archit Gupta, those at income upto ₹7.5L (due to rebate, salaried with total income upto ₹7.5L will not pay any tax) or very high-income bracket of ₹5crore plus (due to reduction in surcharge from 37% to 25%), will benefit from being in the new tax regime.

Since the new regime does not allow for additional depreciation, you must weigh the pros and cons of both the tax regime before deciding to go ahead with the new tax regime or choosing the old one.