New Delhi: Good news for taxpayers! The ITR filing deadline has been extended to September 15, giving you more time to make smart tax decisions. One key choice is picking between the old and new tax regime. If you’re a salaried employee or a pensioner with no business income, you can easily switch between the two each year while filing your return, just by selecting the right option in your ITR form.
If you earn income from a business or profession, switching tax regimes comes with stricter rules. You’re allowed to go back to the old tax regime only once in your lifetime after that, your choice is locked. To make this switch, you’ll need to file Form 10-IEA before the ITR deadline. If you miss it, the new tax regime will automatically apply by default.
If you are confused about choosing which regime, you should be aware that House Rent Allowance (HRA), Leave Travel Allowance (LTA), deductions under Sections 80C to 80U, and home loan interest under Section 24(b) are only available under the old tax regime. The new regime has fewer deductions, but individuals with taxable income up to Rs 12 lakh get a full tax rebate under the new regime. Your entire income will be taxed slab-wise if your taxable income exceeds Rs 12 lakh.
Not sure which tax regime to choose? Here’s what you need to know. If you want to claim benefits like House Rent Allowance (HRA), Leave Travel Allowance (LTA), deductions under Sections 80C to 80U, or home loan interest under Section 24(b), you’ll need to stick with the old tax regime.
The new regime offers fewer deductions, but if your taxable income is up to Rs 12 lakh, you could get a full tax rebate. However, if your income goes above Rs 12 lakh, the entire amount will be taxed according to the slab rates. The slabs are zero tax for the initial Rs 4 lakh, 5 per cent tax on Rs 4 lakh to Rs 8 lakh, 10 per cent on Rs 8 lakh to Rs 12 lakh, 15 per cent on Rs 12 lakh to Rs 16 lakh, and so forth.
Importantly, the new regime allows only limited benefits under Sections 80CCD(2) and 80CCH(2), excluding the broader 80C basket popular among salaried taxpayers. Before choosing a regime, consider your income, pay structure, and tax-saving investments. Salaried individuals with minimal deductions may benefit from the new regime. If you can claim substantial deductions under Sections 80C, 80D, HRA, or house loan interest, the old regime may be more beneficial.
Also, note that you have losses from house property, capital gains, or business income; they cannot be carried forward under the new regime. This may affect future tax liabilities, so consider it before deciding.
As a general rule of thumb, tax experts say that the old tax regime will only be advantageous to taxpayers who are eligible to claim Rs 2 lakh deduction for home loan interest under Section 24(b) or a large house rent allowance (HRA). Most other deductions are unlikely to justify remaining with the old regime. (With IANS Inputs)
