Suppose I opt for new tax regime for current financial year , is it open for me to switch over to old tax regime next financial year ?

Ans: You can switch to new scheme if you don't have income from business

Ans: For a person earning income from source other than business and profession, option of availing old tax regime is available every year and new tax regime rates are default from FY 2023-24 as per proposal of Budget 2023

Ans: Choosing between the old and new tax regimes depends on your financial situation and how much you utilise tax-saving deductions and exemptions. Here's a comparison to help guide your decision:

Old Tax Regime:

Pros:

• Offers numerous deductions and exemptions like Section 80C (up to Rs 1.5 lakh), HRA, LTA, and standard deductions (Rs 50,000)
• Suitable if you maximise deductions and exemptions
• Better for those with home loans, insurance premiums, and investments in tax-saving instruments

Cons:

• Requires more tax planning
• If your investments and expenses don't lead to substantial deductions, the tax liability can be higher

New Tax Regime:

Pros:

• Simplified tax structure with lower tax rates
• No need for tax-saving investments to reduce tax liability
• Best for those who have fewer deductions and exemptions

Cons:

• No deductions or exemptions available
• You lose benefits like HRA, standard deduction, and Section 80C benefits

Tax Rate Comparison:

In the new regime, the tax slabs are lower, but you forego deductions:

• Up to Rs 2.5 lakh: Nil
• Rs 2.5 - 5 lakh: 5%
• Rs 5 - 7.5 lakh: 10%
• Rs 7.5 - 10 lakh: 15%
• Rs 10 - 12.5 lakh: 20%
• Rs 12.5 lakh and above: 25%

In the old regime, the tax slabs are:

• Up to Rs 2.5 lakh: Nil
• Rs 2.5 - 5 lakh: 5%
• Rs 5 - 10 lakh: 20%
• Rs 10 lakh and above: 30%

Your Situation:

Given your salary of Rs 12.5 lakh:

If you're making full use of deductions (like Rs 1.5 lakh under 80C, Rs 50,000 standard deduction, and others like home loan interest, HRA, etc.), the old regime might be beneficial.

If you're not able to claim significant deductions, the new regime might result in lower tax liability due to the lower slab rates.