New Delhi: With the income tax return (ITR) filing date extended to September 15, taxpayers have more time to decide whether to choose the old or new tax regime.
Salaried employees or pensioners without business income can change their tax regime at any time prior to filing their ITR every year by simply selecting the relevant option on the ITR-1 or ITR-2 form.
With commercial or professional income, the regulations are stricter. Only once in your lifetime may you return to the old tax regime, and the choice is locked afterwards. For this change, you must file Form 10-IEA before the filing date. The new tax regime will take effect by default if you miss filing this form.
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.
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.
(IANS)
