Factor in income, deductions when deciding tax regime

If you have significant deductible investments, the old regime could save you more money, but crunch the numbers

- BINDISHA SARANG

As a new financial year begins, expect your employer to reach out to you regarding choosing a tax regime for 2024-25, if they have not already. This decision is crucial. The choice of tax regime dictates how your income will be taxed. If you don't make the right pick, you might end up losing money.

"The new tax regime has become the default tax regime for individuals after the Finance Act, 2023, from the financial year 2023-24 onwards," says SR Patnaik, partner, Cyril Amarchand Mangaldas.

The new regime

The new tax regime offers lower tax rates but with fewer deductions and exemptions. Here, taxpayers cannot claim various popular deductions under Sections 80C, 80D and 24.

However, some deductions, such as standard deduction and family pension (those receiving a family pension can claim a deduction of 15,000 or one-third of the pension, whichever is lower) remain available. "This regime simplifies the tax structure and reduces the tax burden for many, especially those who do not have significant deductions under the old regime," says Suresh Surana, founder of RSM India.

The benefit of a rebate under Section 87A is available to resident individuals opting for the new regime.