The new financial year, 2020-2021, is trudging along as the coronavirus pandemic continues to grip the world. For some, work might have come to standstill. For others, work goes on, albeit a tad slower than usual. It doesn’t matter whether you’re a salaried employee or you run your own business. When it comes to your investments and taxes, now is a good time to plan out the next twelve months.
Two months ago, Finance Minister, Nirmala Sitharaman, introduced the optional new tax regime that’s applicable this Financial Year onward. The new regime has more tax slabs, lower tax rates and reduced exemptions and deductions.
Should you opt for the new regime or stick to the old one? Which one is better for you?
This is something you have to decide for yourself, your employer will not do it for you. So today, let’s take a look at some of the factors that will influence your decision.
Calculate your taxes
If you’d like to calculate how much tax you’d be paying, new versus old, head over to this link – https://www.incometaxindiaefiling.gov.in/Tax_Calculator/. It’s the official Income Tax Department Tax Calculator. The only figures you’d need to be ready with are your estimated total annual income and all your estimated exemptions and deductions like house rent, home loan and investments. Your payroll software would have a more detailed calculation sheet as well.
With the lockdown being extended, I’d advise you to use this time well.
- Plan out your investments for the year
- Since most investments related to tax saving are for the long term, it’s a good time to invest despite the economic downturn
- Try to maintain your current level of investments
- If you have lump-sum payments coming up, like life insurance premium, set aside a small amount every month, so that it doesn’t hit you all of a sudden when the due date approaches
If you’d like some help with these calculations, just leave us a comment below.
