Old or new tax regime? Which one is better for you in the new fiscal year

By: Admin
April 20, 2024
Categories: Income Tax News|News
4 Min Read

Choosing between India’s new and old tax regimes depends on your individual financial situation, income sources, and investment habits. Remember, from the new financial year, the new income-tax regime has been set as the default option. Therefore, if you wish to continue with the old regime, you will be required to opt for the same in your income-tax regime (ITR) or file Form 10 – IEA, if you have business income, at the time of filing return. Taxpayers not having business income will have the option to switch between regimes on an annual basis.

Old tax regime

Deductions galore: Claim deductions for various expenses like investments in Public Provident Fund (PPF), equity-linked savings scheme (ELSS), National Pension System (NPS) under Section 80C, House Rent Allowance (HRA), medical expenses under Section 80D, interest on home loan repayment, leave travel allowances (LTA), education loans (Section 80E), and more. These deductions effectively reduce your taxable income, leading to lower tax outgo.

Tailored for investors and expense-heavy individuals: If you invest heavily in tax-saving instruments, pay interest on a home loan, or incur significant medical expenses, the old regime can offer significant tax benefits by reducing your taxable income.

Drawbacks

Higher tax slabs: Compared to the new regime, the old regime has higher tax slabs. This means you could end up paying more tax if your income falls within a higher tax bracket even after claiming deductions.

Record-keeping burden: Maintaining detailed records for all claimed deductions is crucial under the old regime. This can be time-consuming and requires meticulous organisation throughout the year.

New Tax Regime

The new tax regime: A simpler approach

Introduced in 2020, the new tax regime offers a simpler way to file taxes. Here’s what you need to know:

Benefits

Lower tax slabs: Compared to the old regime, the new regime offers lower tax slabs. This can translate into lower tax liability, especially for individuals in lower income brackets.

Simpler filing: The new regime eliminates the need to claim deductions for most expenses. This simplifies the tax-filing process, eliminating the burden of record-keeping for deductions.

Source from: https://www.business-standard.com/finance/personal-finance/old-or-new-tax-regime-which-one-is-better-for-you-in-the-new-fiscal-year-124041801225_1.html