Confused about tax regimes, read on to choose the right one

The financial year 2023-24 has started from April 1 but the changes made in the budget of 2023 have increased the confusion of taxpayers. Taxpayers are entangled in the calculations to save tax and this time tax saving plan starts by choosing the tax system.

For tax saving and financial planning to go hand in hand you need to make a blueprint for it. Because last minute rush to save tax can backfire.

From the financial year 2023-24, the new tax regime has been made the default regime. However, the option of the old tax regime will be available, but you will have to opt for it. Companies have already started sending emails to employees to choose the relevant tax regime, so that the employer can deduct proper TDS.

Tax experts believe that if the annual income is up to Rs 10 lakh, then it would be better to opt for the new tax regime. Also, if you have not made investments like insurance, mutual funds and have not taken a home loan to save tax, then the new system should be suitable. For taxpayers who are taking advantage of exemptions and deductions or want to take them, then the old tax regime can be beneficial. With the help of the tax calculator on the Income Tax Department’s website, you can calculate your tax in the new and old regime and choose the right tax regime. Even if the annual income is up to Rs 7 lakh, the new regime is beneficial because there will be no tax on it.

Tax saving is definitely a part of financial planning but investment should not to made to save tax. Instead it should be made on the basis of financial goals. Asset allocation plays a major role in choosing investment options as it helps in reducing tax liability and maximising return on investment.

There is no need to invest in the new tax regime to save tax. You should choose this, keeping in mind the financial security and financial goals. But if you choose the old regime, then you will have to take help of investments in order to save tax.