Tax Regime | Meaning and Definition

What is a Tax Regime?

The Tax regime elaborates tax rates and tax slabs. In the year 2020, the government adopted a new tax regime that has more tax-saving options but with higher tax rates. The new tax regime also offers the option of selecting either old or new tax regimes to taxpayers, which renders the taxation process even more complicated. When deciding what option to go for, you must try approaching it in a systematic manner to avoid unnecessary hassles in figuring it out.

•   Estimate all the exemptions accessible.
•   Look at all the deductions you can make a claim on 

Correspondingly, every taxpayer will relish different tax benefits under the two regimes of taxation. Taxpayers need to be cautious of prioritizing tax regimes over life goals. For example, you need to decide whether to invest your capital or go for securities or insurance, depending upon your requirements.

The new tax regime, introduced lately, is different from the old one in two aspects. First, the new regime entails more tax slabs which are accompanied by reduced rates in the sub-Rs Fifteen lakh range. And second, all the deductions and exemptions that were utilized by taxpayers in the current regime shall not be accessible in the new taxation regime.

If a person chooses a new tax regime, deductions offered in the old tax regime are not made available. Thus, experts recommend that if the benefit of lower rates outpaces the perks of deductions and exemptions available under the old regime, then the taxpayer should go for the new tax regime.