New Vs Old Income Tax Regime: New Vs Old Income Tax Regime: While filing your Income Tax Return (ITR), one of the most common and confusing questions is: Which tax regime is better for you? Which option will help you save more? The old tax regime allows individuals to claim various exemptions and deductions, such as HRA, 80C, and 80D, reducing taxable income. On the other hand, the new tax regime offers lower tax rates but eliminates most exemptions and deductions, making the process simpler.
For filing the tax Return (ITR) for the financial year 2024-25, there’s something important to note – If you haven’t selected a regime, the new tax regime will be your default regime. The right choice for selecting the regime depends on factors like income structure, investment habits, and long-term financial goals. Understanding the pros and cons of each tax regime can help you save more and make a smarter financial decision. If you’re filing your Income Tax Return (ITR) for the 2024-25 financial year, keep in mind that the new tax regime is now the default. This means that unless you specifically opt for the old regime, your taxes will be calculated under the new system.
But here’s the catch—your ability to switch between the two depends on your source of income. While salaried individuals can choose between regimes every year, those with business income have more restrictions. So, before making a choice, it’s crucial to understand which regime works best for your financial situation.
Who Has More Flexibility?
More than business men and those with business or professional income salaried employees have more flexibility. as the former will have stricter rules to follow. For business owners and professionals, If they opt for the new tax regime, they can’t keep switching back and forth every year. They get only one chance to return to the old regime—after that, it’s a permanent switch. So, it’s essential to choose wisely!
As per Budget 2023, anyone choosing the old tax regime must submit Form 10-IEA before filing their ITR to make it official. But salaried individuals and those without business income? They can make a fresh decision each year, as long as they do so before the deadline.
How To Switch Between Tax Regimes Every Year?
You will be able to change your tax regime every year, if your income comes from salary, interest, or rent (basically, non-business sources). You can change your tax regime every year. If you chose the new tax regime last year, don’t worry—you can still switch back to the old one this time, as long as you make the change before filing your ITR. But here’s the catch: you can only opt for the old tax regime if you file your return on time!
As per Budget 2023, anyone choosing the old tax regime must submit Form 10-IEA before filing their ITR to make it official. But salaried individuals and those without business income? They can make a fresh decision each year, as long as they do so before the deadline.
Difference Between Old Vs New Tax Regime
Old Tax Regime – More Deductions, But Higher Tax Rates
If you prefer tax-saving options, the old regime lets you claim deductions under:
Section 80C – Investments like PPF, EPF, life insurance, and more
Section 80D – Medical insurance premium deductions
House Rent Allowance (HRA) – Tax benefits on rent paid
New Tax Regime – Lower Tax Rates, But Fewer Perks
The new regime offers lower tax rates, but here’s the trade-off—you lose out on most deductions. If you don’t invest in tax-saving instruments or prefer a simpler, no-hassle approach, this might be for you.
