In this edition of Ask Money Today, find out which regime you should choose while filing returns if you have deductions.
I work in a multi-national company, and my remuneration package is more than Rs. 35 lakh per annum. I have been availing of all the tax-saving benefits, like contributing Rs 1.5 lakh to the Public Provident Fund (PPF), plus Rs. 50,000 to the National Pension System (NPS). I also have a health insurance policy with an annual premium of Rs. 38,000, and I have taken a home loan for which my interest payment is more than Rs. 3 lakh a year. Please advise me on whether I should shift to the new tax regime from the next financial year. I understand that I will not benefit from the deductions I have been claiming for so many years.
Reply by Rajiv Bajaj, Chairman & MD, BajajCapital
It would be best not to shift to the new tax regime from the next financial year. You should continue with the old tax regime and claim all the deductions under section 80C, plus 80CCD, 80D, 80T of the Income Tax Act, and section 24 for interest on home loans etc., and you will find that your tax liability will be much lower than if you shift to the new regime.
To be sure, you should add up all your eligible deductions—like 80C (maximum Rs 1.5 lakh), 80D (maximum Rs 75,000 if your senior citizen parents are also included in the health insurance policy), 80CCD (NPS maximum of Rs 50,000), 80 TTA (savings bank interest of a maximum of Rs 10,000) and interest on home loan (section 24 maximum Rs 2 lakh). If the total of all these deductions is higher than Rs 3.75 lakh, then you should continue with the old tax system, as your final tax liability will be lower than what it will be under the new tax regime. The crucial factor to consider is whether your total deductions exceed Rs 3.75 lakh or not.
In your case, since the total deductions you claim are higher than Rs 3.75 lakh, you should continue using the old tax regime and, thereby, keep your tax liability as low as possible.
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