Tax Planning 101
Saving tax legally and choosing between the new vs. old regime.
What is Tax Planning?
Tax planning is the process of analyzing your financial situation to ensure you are working as efficiently as possible from a tax perspective. It's not about evading taxes, but about using the various deductions, exemptions, and benefits provided by the law to legally reduce your tax liability.
Effective tax planning allows you to increase your in-hand income and channel more money towards your financial goals.
New Tax Regime vs. Old Tax Regime
The choice depends on your income and the deductions you can claim.
Old Tax Regime
This regime has higher tax slab rates but allows you to claim over 70 deductions and exemptions. It is beneficial for individuals who make full use of these deductions.
- Higher tax rates.
- Allows deductions (80C, 80D, HRA, etc.).
- Good for those who invest in tax-saving instruments.
New Tax Regime (Default)
This regime offers lower, more streamlined tax slabs but requires you to forgo most of the popular deductions. It is simpler and may be beneficial for those who don't have many deductions to claim.
- Lower tax rates.
- Forgoes most deductions (except standard deduction).
- Good for those with fewer investments or a simpler financial profile.