Old Tax Regime vs New Tax Regime: The Finance Act 2024 has amended Section 115BAC, effective from AY 2024-25, designating the new tax regime as the default for individuals, HUF, AOP (excluding cooperative societies), BOI, or Artificial Juridical Persons. However, eligible taxpayers can choose to opt out of the new tax regime and continue under the old tax regime. The old tax regime allows taxpayers to claim various tax deductions and exemptions that were available before the introduction of the new system.
For “non-business cases,” taxpayers can elect their preferred tax regime each year by selecting the option in their Income Tax Return (ITR), which must be filed on or before the due date under section 139(1).
For taxpayers with income from business and profession, the new tax regime is the default. If these taxpayers wish to opt-out, they must submit Form 10-IEA on or before the due date for filing the income return under section 139(1). Similarly, opting out of the old tax regime (if they initially chose it) also requires submitting Form 10-IEA. Importantly, the option to switch to the old tax regime and later withdraw it can only be exercised once in a lifetime for eligible taxpayers with business or professional income.
What Is The Difference Between Old And New Tax Regime?
The old and new tax regimes differ in their tax slabs and rates. The old tax regime allows various deductions and exemptions, whereas the new tax regime offers lower tax rates but with limited deductions and exemptions.
For individuals (resident or non-resident) under 60 years of age at any time during the previous year, the following tax rates apply:
Old Regime Tax Slab And New Regime Tax Slab Comparison
Standard Deduction On Salary
The standard deduction of Rs 50,000 on salary income, which was previously available only under the old tax regime, is now applicable under the new tax regime as well. Furthermore, this deduction has been increased to Rs 75,000 exclusively for the new regime, effective from FY 2024-25.
Rebate Under Section 87A
Old Tax Regime:
A tax rebate of up to Rs 12,500 is available for resident individuals whose total income does not exceed Rs 5,00,000. This rebate does not apply to Non-Resident Indians (NRIs).
New Tax Regime:
A tax rebate of up to Rs 25,000 is available for resident individuals whose total income does not exceed Rs 7,00,000. This rebate does not apply to NRIs.
Old Tax Regime And New Tax Regime, Which Is Better?
The choice between the two tax regimes depends on individual circumstances. It’s recommended to conduct a comparative evaluation under both regimes to determine which best suits your needs. Taxpayers can estimate and compare their tax liability under both regimes using the income and tax calculator available on the Income Tax Portal.
As budget 2025 approaches, taxpayers and the business community alike are anticipating key reforms aimed at enhancing financial relief and simplifying the tax system.
Source from: https://www.news18.com/business/tax/budget-2025-income-tax-slabs-old-regime-vs-new-regime-9186222.html
