ITR Filing 2024-25: New Vs Old Income Tax Regime

Margesh Rai

24 Jul, 2024

In the Union Budget 2024, Finance Minister Nirmala Sitharaman announced several changes to the new income tax regime. These changes include updated FY 2024-25 income tax slabs and increased standard deductions. However, these changes will only become law after Parliament passes the budget and receives the President’s assent.

The new tax regime is the default option, meaning it will automatically apply unless a taxpayer specifically opts to continue with the old tax regime. Taxpayers need to review these updates and decide which regime works best for their financial situation.

Quick Recap of Income Tax Slab for FY 2024-25

Here is a quick recap of the Income Tax Slab introduced by the Ministry of Finance.

• Income between Rs. 0 to Rs.3 lakh is Nil.
• Income between Rs. 3 lakh to Rs.7 lakh is 5%.
• Income between Rs.7 lakh to Rs.10 lakh is 10%.
• Income between Rs.10 lakh to Rs.12 lakh is 15%.
• Income between Rs. 12 lakh to Rs.15 lakh is 20%.
• Income above Rs.15 lakh is 30%.

ITR Filing 2024-25 Things to Consider Before Filing Your Income Tax Return

As we know we are in the month of filing Income Tax Return (ITR) and meeting the July 31^st deadline is crucial to avoid legal penalties. With the introduction of the new tax regime, filing ITR can be intricate; therefore, consider the points given below before filing your income tax return:

1. Default Tax Regime

The new tax regime is currently the default tax regime. This means that an individual’s tax liability will be calculated on the basis of the new tax regime unless the taxpayer specifically opts for the old tax regime. However, the old tax regime provides deductions like Section 80C, Section 80D, and tax exemptions on house rent allowance (HRA).

2. People with income from F&O

People earning income from business or professions, such as trading options or futures, can switch out of the old tax regime once but cannot revert to it again.

3. Comparison between Old and New Tax Regime

The new tax regime has widened the income slabs, particularly the 5% slab, which extends to Rs.7 lakh compared to Rs.5 lakh in the old tax regime. This extension of the income tax slab has relieved middle-class society and individuals earning up to 7 lakh annually.

The old tax regime provides exemptions such as HRA, LTA, and chapter VIA, while the new tax regime offers a lower tax rate but removes most exemptions and deductions.

4. Filing of Form 10-IEA

As per the new tax regime, if you want to change from the default new regime to the old regime to file the income tax return, you must file form 10-IEA within the due date. However, after the due date, one must file an income tax return under the default new regime by giving up on most of the deductions, exemptions, and losses.

5. NPS Tax Benefits under the New Tax Regime

The National Pension Scheme contribution limit for private-sector employers was raised from 10% to 14% of the employee’s basic salary.

New vs. old Income Tax Regime

Here given below are the tax rates compared between the new income tax regime and the old income tax regime:

1. The government of India, in the new tax regime, has increased the standard deduction limit to Rs 75,000, allowing salaried individuals or classes to save up to Rs.17,500 in taxes. On the other hand, the standard deduction under the old tax regime was Rs.50,000.
2. The exemption limit for non-government employees has been raised from Rs.3 lakhs to Rs. 25 lakhs, an 8-fold increase compared to the old tax regime.
3. The standard deduction for family pensioners has also increased from Rs. 15,000 to Rs. 25,000.
4. In the new tax regime, the surcharge rate on annual income over Rs.5 crore has been reduced from 37% to 25%. This move will reduce the effective rate from 42.74% to 39%.
5. The documentation process under the new tax regime is simple, as it eliminates the need to calculate deductions and exemptions compared to the old tax regime. Hence, this simple documentation process helps taxpayers file ITR quickly.

How to Choose Between Old and New Tax Regime?

With the introduction of the new tax regime by the Ministry of Finance, individuals now have two options for filing their ITR: the default new tax regime or the old tax regime. Each regime comes with tax slabs, deductions, and exemptions, making the choice crucial for determining your final tax liability.

Before deciding which regime to choose, it’s important to weigh the pros and cons of each. Evaluate the tax exemptions and deductions available under the old regime and compare your net taxable income with the tax liability under the new regime. The goal is to choose the option with lower tax liability.

Consider your earnings, investments, and future financial goals to make the best choice. A careful calculation will help you make an informed decision and ensure you choose the regime that best suits your financial situation.

Conclusion

The new income tax regime is particularly beneficial for middle-class families, especially those with personal commitments like repaying personal or vehicle loans and many more. It also appeals to those who prefer a simpler tax filing process without the burden of extensive documentation.

On the other hand, the old tax regime offers more tax savings for senior citizens and those who earn a significant portion of their income from interest, benefiting from provisions like Section 80TTB.

Both the old and new tax regime have their pros and cons. It’s important to carefully compare them based on your unique financial situation and annual income to choose the best option for your tax planning.

FAQ’s