Which Regime is Better: Old or New?
When filing your Income Tax Return (ITR), choosing between the old and new tax regimes can significantly impact your tax liability. Here’s a simplified breakdown to help you make an informed decision. Understanding the Basics Old Tax Regime: Allows for various exemptions and deductions like HRA, LTA, standard deduction, and investments under sections such as 80C, 80D, etc. New Tax Regime: Offers lower tax rates but removes most deductions and exemptions. Key Differences Income Slab Old Regime Rate New Regime Rate Up to 2.5L Nil Nil 2.5L – 5L 5% 5% 5L – 7.5L 20% 10% 7.5L – 10L 20% 15% 10L – 12.5L 30% 20% 12.5L – 15L 30% 25% Above 15L 30% 30% Pros and Cons Old Regime Pros: Beneficial for those who invest in tax-saving instruments and claim exemptions. Cons: Requires meticulous planning and documentation. New Regime Pros: Simpler filing process with reduced paperwork. Cons: May not be beneficial if you heavily rely on deductions. Who Should Choose What? Choose Old Regime If: You claim multiple deductions and exemptions. You have housing loans, insurance, or tuition fees. Choose New Regime If: You prefer a simplified tax structure. You do not have significant deductions. Conclusion Evaluate your annual income and eligible deductions to determine the most beneficial tax regime. Using online tax calculators or consulting a tax professional can further aid in making the right choice. Making the right decision between the old and new tax regimes can lead to substantial savings and a smoother filing process.
