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Saturday, February 4, 2023

Can I go for new tax regime now and later swap again to the outdated tax regime


A reader asks, “Sir, thanks for the outdated tax regime vs the brand new tax regime calculator. It’s very easy and helpful. I realised that the brand new regime is healthier from the subsequent monetary 12 months until somebody has an enormous HRA or house mortgage curiosity. Nonetheless, if I want to purchase a home in future, can I swap again to the outdated tax regime?

We don’t understand how lengthy the outdated tax regime will live on! As per present guidelines. For those who select the brand new tax regime, you’ll be able to swap again to the outdated regime anytime if you’re salaried with no enterprise earnings. When you have a enterprise earnings, you’ll be able to swap again to the outdated regime as soon as however then can’t transfer to the brand new regime once more. These guidelines could change if the outdated regime is sundown. This implies salaried individuals or HUF with no enterprise earnings (these submitting ITR1 and a couple of) can select between the outdated and new regime (part 115BAC) yearly.

Others (with enterprise earnings) can select to be within the outdated regime for so long as they need, however as soon as they shift to the brand new tax slab, they are going to be allowed to withdraw solely as soon as. In the event that they swap again to the outdated regime from the brand new one, they can’t return to the brand new one until their enterprise earnings is zero.

One other reader asks,

Q: If a salaried particular person with a small facet earnings from enterprise ( and trustworthy sufficient to indicate it) is on the fag finish of their working life and is predicted to retire quickly with quantity of gratuity + depart encashment, I assume they need to wait and watch earlier than transferring to New Tax Regime. The tax outgo could also be fairly excessive if the lump sum is added to the wage, which is exempted in any other case underneath part 10(10) and due to the earnings from a enterprise, he could not be capable of swap freely between two regimes. Is that this understanding appropriate?

A: Part 10(10D) additionally applies to the brand new tax regime. The maturity quantity acquired from insurance policies bought on or earlier than March thirty first 2023, is totally tax-exempt within the new tax regime whatever the premium quantity.

For all times insurance coverage insurance policies issued on or after April 1, 2023, the tax exemption on maturity advantages underneath Part 10(10D) will solely be relevant if the combination premium paid by a person is lower than or equal to Rs 5 lakh (after all this will not be related to the reader).

Due to this fact, I believe you’ll be able to shift to the brand new tax regime until different tax deductions like HRA are important. Use our calculator to seek out out: Ought to I swap to the New Tax Regime from 1st April 2023?

Q: Within the above-mentioned case, if the particular person doesn’t have earnings from enterprise/career, will he be capable of select New Regime for FY 2023-24 after which on the 12 months of receipt of the retirement advantages (say in FY 2024-2025 or past)? The particular person can transfer again to the outdated regime to make the most of part 10(10). Is that this understanding appropriate primarily based on the current situations?

A: As talked about above, your understanding is flawed. You possibly can shift to the brand new regime and keep put.

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