Dear Mr. Rego, Are there any tax saving options available, considering I am on new tax regime. Also, I don't have any home/auto/etc. loan, and stay in my own apartment. Regards, Praveen

Ans: Under new tax regime in addition to low tax slab rate, few deductions are available like Employer’s Contributions to Employees NPS Accounts, certain deduction from salary income like standard deductions, Transport Allowance, Conveyance Allowance, Perquisites for official purpose etc

Ans: Dear Praveen,

Thank you for your question. I understand that you're looking for tax-saving options under the new tax regime. While the new tax regime does limit some of the deductions available under the old regime, there are still a few options you can consider.

Standard Deduction: A fixed amount of Rs. 50,000 is allowed as a deduction from the total income of salaried individuals. Please note that if you claim this standard deduction, you cannot claim any other deduction for the same amount under any other section of the Income Tax Act.
Employer's Contribution to NPS: If your employer contributes to your National Pension Scheme (NPS) account, this contribution can be claimed as a deduction.
Transport Allowances for Persons with Disabilities: If you have a disability, you may be eligible for deductions related to transport allowances.
Gratuity: If you receive a gratuity from your employer, it may be exempt from tax under Section 10(10).
Leave Encashment: If you receive any amount in lieu of leave not taken, it may be exempt from tax under Section 10(10AA).
Please remember that tax planning should be a part of your overall financial planning. It's important to choose the options that best suit your financial goals and circumstances. If you need more detailed advice, I would recommend consulting with a tax advisor who can provide guidance based on your specific situation.

I hope this helps!

Ans: Hello;

You may invest 50 K in NPS and claim deduction for the same under Sec. 80 CCD(1B) over and above the 80 C deductions.

Best wishes;

Ans: Interest paid on Home Loan is also exempt under the new tax regime. You may plan for that.
I feel in your case old regime may not be beneficial even after all tax savings under 80-C, 80-D & 80CCD(1b).
Most welcome for any further clarifications. Thanks.

Ans: The new tax regime in India, introduced in the Budget 2020, offers lower tax rates but without the benefit of most deductions and exemptions available under the old tax regime. It’s designed to simplify the tax system and provide an alternative to taxpayers who prefer a straightforward approach to tax calculation.

Comparing Old vs. New Tax Regime
Under the old tax regime, you could reduce your taxable income by claiming deductions under various sections like Section 80C, 80D, HRA, LTA, etc. However, the new tax regime offers a lower tax rate but does not allow most of these deductions.

Here’s a quick comparison:

Old Tax Regime: Allows deductions under various sections like 80C, 80D, HRA, LTA, etc.

New Tax Regime: Offers lower tax rates but without most deductions and exemptions.

Tax Slabs Under the New Regime
The tax slabs under the new tax regime are as follows:

Income up to Rs. 2.5 lakh: No tax

Income from Rs. 2.5 lakh to Rs. 5 lakh: 5% tax

Income from Rs. 5 lakh to Rs. 7.5 lakh: 10% tax

Income from Rs. 7.5 lakh to Rs. 10 lakh: 15% tax

Income from Rs. 10 lakh to Rs. 12.5 lakh: 20% tax

Income from Rs. 12.5 lakh to Rs. 15 lakh: 25% tax

Income above Rs. 15 lakh: 30% tax

Deciding Between Old and New Regime
To decide whether to opt for the new tax regime, consider the following:

Total Income: Higher income levels might benefit more from the lower tax rates in the new regime, especially if you don't claim many deductions.

Deductions Claimed: If you claim significant deductions under the old regime, sticking with it might be more beneficial. If you don’t claim many deductions, the new regime could be better.

Investment Discipline: If you prefer not to invest in tax-saving instruments or if your lifestyle doesn't support certain deductions, the new regime offers simplicity.

Strategies to Save Money in the New Tax Regime
If you decide to opt for the new tax regime, here are a few strategies to maximize your savings:

Income Tax Rebate (Section 87A): If your taxable income is up to Rs. 5 lakh, you can still claim a rebate under Section 87A, which reduces your tax liability to zero.

Avoid Unnecessary Investments: Under the new regime, you are not required to invest in tax-saving instruments like ELSS, PPF, or NSC just for the sake of deductions. This can free up your cash flow for other investments or expenses.

Focus on Direct Investments: You can focus on investments that suit your financial goals rather than being driven by tax-saving needs. This could include mutual funds, stocks, or even building an emergency fund.

Simplified Tax Filing: The new regime simplifies tax filing as you don’t need to track and claim various deductions. This can save you time and reduce the complexity of your tax return.

Optimize Employer Benefits: If you have employer-provided benefits like NPS contributions, you might still want to consider the old regime. However, under the new regime, your take-home salary might be higher since you’re not contributing to tax-saving investments.

Finally
Choosing the new tax regime can simplify your tax planning and may reduce your tax outgo if you don’t rely heavily on deductions. It’s essential to weigh your income, deductions, and financial goals before making the switch. If you're still unsure, you can consult a Certified Financial Planner to evaluate your specific situation and determine the best approach for you.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in