Things to remember when switching tax regime
When you are planning to switch to a different tax regime, here are a few points you should remember to avoid any ambiguity regarding exceptions and exemptions available:
- Be aware of your tax regime
You should have a thorough knowledge of the tax rates, basic exemption limits, deductions allowed and other features of the old and new tax regimes. This will help you make a careful consideration, and choose the regime that suits you the best and helps you save taxes.
Use an online income tax calculator to easily calculate the tax you should pay for your income under the old and new tax regimes. Understand the deductions you qualify for under both regimes to make a qualified decision.
- Impact of the regime on your investments and savings
If you already have some savings and investments, you should consider the implications of the new tax regime on your finances. Some investments for which deductions were allowed in the previous tax regime may not be valid anymore. Check the impact thoroughly and switch to the new tax regime only if it benefits you.
Whether you follow the old or new tax regime, ensure you have proper documentation to support your income, deductions, expenses, investments, exemptions and more. This makes it easy for you when filing your income tax returns. Make sure to have valid offline/online proofs for every record.
Apart from understanding the implications of the new tax regime in the short run, consider it from a long-term perspective as well. Is the new tax structure aligned with your future financial planning and tax-saving goals? If yes, you can consider switching to the new structure.
Conclusion
Changing tax regimes while filing your ITR is definitely possible. Consider tax rebates under both regimes, like Section 80D for premiums in health insurance policy, before deciding to switch. If you find navigating the complexities of tax regimes intriguing, seek guidance from a tax advisor or financial expert.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.
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