Kuvera's video: Old tax regime Vs New - What s right for you

The FY24 Budget offered many income tax benefits to individuals. But all these gifts had a caveat. They were only for those who have shifted or were going to shift to the new income tax regime. So, what is the new income tax regime and how is it different from the old tax regime? Under the old tax regime, the government provided various incentives for savings such as PPF, nudged people to take insurance through extra incentives for medical insurance, and even incentivised the purchase of a house by giving extra deductions up to ₹ 2 lahks. All in all, a person could shave off over Rs 4.5 lakh through various instruments. And then, there are other means to save too such as HRA or housing rent allowance. Even a holiday with your family can help save through leave travel allowance or LTA. In FY21, the government introduced a new regime that does not allow most of the deductions or incentives but lowered the tax rates. In the FY24 budget, the government made the tax rate under the new regime even more attractive. So, which tax regime should you opt for? Let’s see this by example. If your taxable income from salary happens to be Rs 7 lakh, the choice is mostly clear. The new regime doesn't tax income up to Rs 7 lakh, whereas you will end up paying a tax of Rs 44,200 under the old regime, assuming zero deductions. But if you were to invest up to Rs 1.5 lakh in various schemes under Section 80C, you will pay zero tax under both the regimes. So, it all boils down to investments and allowances that you can claim for deduction under various sections of the Income Tax Act. A back-of-the-envelope calculation shows investments of around Rs 2 lakh and interest on home loans of Rs 2 lakh is when you will save substantial tax under the old regime. For example, let us take an annual salaried income of Rs 50 lakh with a housing loan interest payment of Rs 2 lakh and investments of Rs 1.5 lakh in PPF. The net tax payable will be Rs 7,800 less in the old regime. How do I know this? I simply went to Kuvera’s tax calculator at https://kuvera.in/explore/tax-calculator, you can also click on the link given below. One has to simply enter the taxable income and the likely deductions to arrive at the tax under both the regimes. Also, don’t forget to add the standard deduction of Rs 50,000 that you will get under both regimes in case of salary or pension income. The one factor that is emerging as a big play in the old tax regime is interest on housing loans. Even if you don’t have a home loan now, do keep in mind that you may take one in future. But once you move to the new tax regime you can never claim benefits from it. So, do your calculations. It is rather easy. You can use Kuvera’s tax calculator at https://kuvera.in/explore/tax-calculator, One has to simply enter the taxable income and the likely deductions to arrive at the tax under both the regimes. But, remember there is no going back to the old regime once you move out. So, not only check the savings now but do also keep an eye on the future. ’sbetterneworoldtaxregime Stay updated with super cool videos on investing. Subscribe to Kuvera Channel https://bit.ly/3bawMXK Follow the conversations across Kuvera.in on Twitter : https://twitter.com/Kuvera_In Facebook : https://www.facebook.com/kuvera.in/ Linkedin : https://www.linkedin.com/company/kuve... To watch more Insights on Market and Mutual Funds, Kuvera Insights Playlist : https://www.youtube.com/playlist?list... To start your investing journey hop over to: https://kuvera.onelink.me/t2AP/75vhvlau —-------------------------------------------------------------------------------------------