Taxpayers now have additional time to choose between the old and new tax regimes as the income tax return (ITR) filing date has been moved to September 15.
By simply choosing the appropriate option on the ITR-1 or ITR-2 form, salaried workers or retirees without company income can alter their tax regime at any point before submitting their annual ITR.
The rules are more stringent when it comes to professional or commercial revenue. You can only go back to the previous tax system once in your lifetime, and once you do, the option is no longer available. You must submit Form 10-IEA for this modification prior to the filing date. If you fail to file this form, the new tax regime will be implemented by default.
If you are having trouble deciding which regime to employ, you should know that only the previous tax system offered deductions under Sections 80C to 80U, home loan interest under Section 24(b), Leave Travel Allowance (LTA), and House Rent Allowance (HRA).
Although there are fewer deductions under the new regime, people with taxable incomes up to Rs 12 lakh are eligible for a complete tax refund. If your taxable income is more than Rs 12 lakh, your entire income will be taxed in slabs.
The initial Rs 4 lakh is tax-free, followed by Rs 4 lakh to Rs 8 lakh at 5%, Rs 8 lakh to Rs 12 lakh at 10%, Rs 12 lakh to Rs 16 lakh at 15%, and so on.
Crucially, the expanded 80C basket that is well-liked by salaried taxpayers is not permitted under the new regime; instead, only restricted benefits are permitted under Sections 80CCD(2) and 80CCH(2).
Take your income, pay structure, and tax-saving investments into account before deciding on a regime. The new system might help salaried people with low deductions. The previous system can be more advantageous if you are able to claim significant deductions under Sections 80C, 80D, HRA, or housing loan interest.
Additionally, keep in mind that under the new regime, any losses you may have from capital gains, company income, or real estate cannot be carried forward. Before making a decision, think about how this can impact future tax obligations.
According to tax experts, the previous tax system will generally only benefit taxpayers who qualify for a significant house rent allowance (HRA) or the Rs 2 lakh deduction for home loan interest under Section 24(b). The majority of other deductions are unlikely to support sticking with the previous administration.