Want to know about tax regimes in India? Explore the choice between the Old Tax Regime and the New Tax Regime, weighing exemptions and deductions against lower tax rates to optimize your tax strategy.
In India, taxpayers have the option to choose between two tax regimes
1.     Old Tax Regime
Under the Old Tax Regime, the taxpayer have the opportunity to avail various exemptions and deductions outlined in Income Tax Act, 1961 that reduces their taxable income. These deductions includes house rent allowances, medical insurance premium, donations to charitable institutions, Savings in Provident Funds etc.
However, taxpayers are required to calculate their tax liability on their taxable income at rates that may be comparatively higher than those in the new tax regime.
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2.     New Tax Regime (Introduced in Budget 2020)
This tax regime offers to taxpayers lower tax rates but eliminates many deductions and exemptions available to taxpayers in old tax regime. They cannot claim exemptions and deductions as discussed above.
The tax rates in new regime provide low tax liability, it is beneficial to those who do not claim many deductions. New Tax Regime is introduces u/s 115BAC of Income Tax Act, 1961.
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The decision to opt for a particular regime depends on factors such as the amount of deductions they usually claim, their tax objective. A careful tax planning is required to maximize your tax savings.
DISCLAIMER: The information provided in this blog is intended for general informational purposes only. While efforts have been made to ensure the accuracy and reliability of the information presented, it may not be comprehensive, and it is subject to change without notice. Readers are advised to consult with experts in the relevant field and verify the information for accuracy and currency. The views expressed are those of the author and may not represent the views of others.