Is the new tax regime suitable for late tax planners

Introduced in 2020, new tax regime Comes with higher tax slabs at lower rates than the old regime (see table), but at the same time, does away with all major tax breaks.

Praleen Bajpai says, “For someone who has delayed tax planning till the last minute, they should calculate their tax outgo under the lower tax rates of the new regime and not just to meet the requirements of the current financial year. One should choose investments for tax breaks in a hurry. , Founder, Finfix.

“It is better to pay some tax under the new regime than lock one lump sum in an investment that does not suit your financial goals to save tax this year.”

Note down all tax-saving investments and expenses made so far including home and education loans, insurance premiums, stamp duty and registration fees for property purchases, children’s tuition fees, etc.

Subtract these from your total income to arrive at net taxable income and calculate the tax you’ll have to pay on it.

Now, calculate your tax liability under the new tax regime in which you have to waive most of the tax exemptions. Depending on the amount of tax outgo under both the options, you can decide.

The new tax regime also provides tax breaks on certain investments, which include deduction on employer’s contribution to the employee’s National Pension Scheme (NPS) account, exemption on maturity income from life insurance policies, PPF, Sukanya Samriddhi Yojana account, etc.

Note that salaried taxpayers have the option to switch between the two regimes every financial year, but those with business income or profession income can switch back to the old regime after opting for the new regime only once in their lifetime .

Income from freelance stints and derivatives trading also qualifies as business income, so salaried individuals would be considered individuals with business income for tax filing and would not have the option to move between the two tax regimes.