Income Tax: Choose for the new tax regime in THESE scenarios

Income tax return (ITR) filing season is back and the taxpayers have two more months to go for filing their tax returns before the July 31 deadline. As the new tax regime is the default regime now, taxpayers who want to file their return under the old tax regime – are meant to opt for it separately.

These are some of the factors which should weigh on your decision of choosing one regime over another – be it old or new tax regime.

New Tax Regime: Weigh these factors 

I. Deductions: If a taxpayer has invested in a slew of tax-saving instruments which are allowed under section 80C, 80D and 80DD, among others – then it is recommended to opt for the old tax regime. Also check point (4).

II. Higher rebate: Since taxability kicks in at a higher threshold in the new tax regime, it is advisable to keep the default regime if your annual salary is upto ₹12.75 lakh for FY 2024-25. 

“Choosing old or the new tax regime mainly depends upon how much deductions and exemptions are available with you. Upto a salary of ₹12.75 lakhs, you can go with the New Tax Regime (NTR). Also in case – you are not having any HRA, home loan, leave travel allowance (LTA), it is highly likely that the New Tax Regime will turn out to be best for you,” says CA Pratibha Goyal, partner, PD Gupta & Co, a Delhi-based firm.

III. HRA: Another key benefit of opting for the new tax regime is the exemption against house rent allowance (HRA). Among several benefits, one of the main advantages of opting for the old tax regime is that it enables you to claim exemption for HRA. 

Under the old tax regime, HRA is exempted under section 10(13A) of Income Tax Act for salaried individuals while this exemption is not available in the new tax regime.

IV. Calculator: Income Tax department has shared Income Tax calculator to where one can find out which tax regime is beneficial over other. As you enter the income details under various heads – you can compute income tax under both the heads separately. As a result, you can choose the regime which gives the lower tax computation. 

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