Taxpayers have two regime options to choose from for tax filing, first is the old tax regime that allows various deduction benefits and the second is the new tax regime that does not offer any tax deduction benefit but relaxes in terms of tax rates and the applicable slabs. So, which option should a senior person choose, the old tax regime or the new one? Let’s find out which tax regime suits you best.

Do You Have Ongoing Tax-Saving Investments That Can’t Be Cancelled?

Often people invest in tax saving schemes which if ended before a certain number of years, may result in a hefty loss. For example, if you have recently started investing in a traditional insurance scheme, you have to continue it for the minimum number of years as mentioned in the policy, or else it may result in a lower return on investment or you may even lose the invested capital.

So, if you have existing tax-saving investments that require your consistent investing commitment in the coming years or if an abrupt end to such investment can cause a loss in your capital, you may continue with the old tax regime.

Also Read: 3 Instruments To Maximise Your Tax Savings As A Senior Citizen

Are You Eligible For Deductions Related To Loan Instruments?

Do you have an existing loan product that has tax deduction benefits attached to it? If yes, then you may continue with the old tax regime. For example, borrowing instruments like home loans and education loans allow tax deduction benefits. Repayment of interest, as well as the principal amount in a home loan, can give you a tax deduction benefit u/s sec 24 and Sec 80C respectively, subject to the applicable ceiling limit. Similarly, interest paid on an education loan for your children, spouse or yourself can be claimed as a deduction u/s 80E. These deductions can help you lower the tax liability, so if you have these loans to repay, you may continue with the old tax regime.

Are You Looking For A Simpler Tax Regime And Not Looking For A Tax Deduction Or A Rebate?

Now, let’s assume you neither have any existing obligation to invest in tax saving schemes, nor a home or education loan to repay the EMIs, which tax regime would suit you most?

If you are looking for a simple and easily understandable tax regime, then you may go ahead with the new tax regime. It can help you to get the freedom to choose investments according to your financial goals and without any obligation of tax savings.

Finally

Before deciding on the tax regime, you must also check in which income tax slab you fall and accordingly compare how much tax liability you’ll have in each regime. In the old regime, seniors could get high exemption benefits such as u/s 80C, 80D, 80E, 80CCD, 80TTB, etc., but in the new regime, they can pay a lower tax amount due to attractive applicable tax rates on applicable slabs when they do not invest in tax saving instruments. So, choose your tax regime based on your exemption requirements and financial comfort. You must consult a tax advisor for in-depth guidance on all your tax-related issues and to avoid a mistake.

Also Read: Housing Plan, Mandatory Savings For Elderly Alongside Tax Reforms: What More In Niti Aayog’s Recommendation

The author is an independent financial journalist.