A salaried client asks whether to choose the old or the new tax regime. How do you advise them?
What the interviewer wants to hear
- Collects details of salary, HRA, home loan and investments
- Computes tax under both regimes
- Explains that the new regime is the default with fewer deductions
- Notes rules on switching for salaried versus business income
- Considers non-tax factors like savings habits
Model answer
I would not answer from a rule of thumb; I would compute both. First I collect the client’s salary structure, rent paid and HRA received, home loan interest, insurance, provident fund and other investments, medical insurance and any other income. Then I compute tax under the old regime, applying HRA exemption, Section 80C, 80D, home loan interest and other deductions, and under the new regime, which is the default, with lower slab rates and a standard deduction but most deductions removed. I show the client both totals side by side. Generally, people with large deductions such as a home loan and full 80C investments may benefit from the old regime, while those with few deductions usually save under the new one. I also explain that salaried individuals without business income can choose each year when filing, while those with business income have stricter switching rules, and that tax should not be the only reason to invest.
Can you answer it under time pressure?
Take a timed medium round and get scored on every answer.
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