Income Tax News: Every year, filing income tax returns can be a daunting task for salaried professionals in India. This year is no different, with the ongoing debate about choosing the optimal tax regime – the old regime or the new regime. This article will specifically address professionals earning a salary of Rs. 15 lakhs and help them decide which regime offers them greater tax benefits.
Understanding the Old and New Tax Regimes
- Old Tax Regime (Traditional System): This regime allows for various deductions and exemptions under sections like 80C, 80D, and HRA (House Rent Allowance). These deductions can significantly reduce your taxable income, leading to lower tax liability. However, the old regime comes with a disadvantage – higher tax rates compared to the new regime.
- New Tax Regime (Simplified System): This regime offers lower tax rates. However, it eliminates most deductions and exemptions available under the old regime. The new regime is intended to simplify the tax filing process.
Choosing the Right Regime for Professionals Earning Rs. 15 Lakhs
For a professional earning Rs. 15 lakhs annually, the decision between the two regimes hinges on the total deductions they can claim under the old regime. Let’s delve deeper:
- If You Claim Substantial Deductions:
If you typically avail significant deductions under sections like 80C (for investments in PPF, ELSS Mutual Funds, etc.), 80D (for medical insurance premiums), and HRA (if paying rent exceeding the HRA limit), the old tax regime might be more beneficial. These deductions can bring your taxable income down to a lower tax slab, potentially reducing your tax outgo.
- If You Have Limited Deductions:
If your deductions are minimal (for instance, only claiming the standard deduction), the new regime’s lower tax rates might be more advantageous. The new regime offers a flat ₹50,000 standard deduction, eliminating the need for collecting investment proofs and simplifying the filing process.
Additional Factors to Consider
- Investment Plans: If you are a regular investor and plan to invest heavily in tax-saving instruments, the old regime might be better.
- Future Salary Increase: If you anticipate a significant salary increase in the coming years, consider the long-term impact. The new regime’s benefit might diminish as you move into higher tax brackets.
Choosing the optimal tax regime requires careful consideration of your individual financial situation. Analyse your deductions, investment plans, and future income prospects before making a decision. Remember, consulting a tax advisor can provide personalised guidance based on your specific circumstances.
