ITR Filling For FY 2023-24: Know The Difference Between New And Old Tax Regime, Which Is Better For You?

Old Vs New Tax Regime:?The time for filing your income tax return (ITR) for the income earned in FY 20223-24 (AY 2024-25) is here once again, and the Income Tax department has already opened its online filing facility. The deadline for filing your ITR for income earned during the FY 2023-24 (AY 2024-25) is July 31, 2024, with no late fee. However, for returns filed after this date or missed filings, the deadline is December 31, 2024.?

While it might be tempting to rush through the process, it's essential to ensure accuracy to avoid future discrepancies. One significant dilemma facing many taxpayers is whether to opt for the old tax regime or embrace the new one. Let's delve into the differences between the two and determine which might be more beneficial for you.

Understanding the New Default Option

Starting this year, the government has set the new income tax regime as the default option. Before diving into your calculations for ITR filing, it's important to consider whether this new regime aligns with your financial strategy.

Key Differences Between Old and New Tax Regimes

One of the fundamental distinctions between the old and new income tax regimes lies in how they handle deductions and exemptions. Under the old regime, taxpayers could claim various deductions under sections such as 80C, 80D, and 80TTA of the Income Tax Act.

In contrast, the new tax regime offers reduced tax rates based on income brackets, eliminating many deductions available under the old regime.

Comparing Tax Slabs

Let's break down the income tax slabs for the financial year 2024-25 under both regimes to provide clarity:

New Tax Regime:

• Income up to Rs. 3 lakh: No tax applicable
• Income between Rs. 3-6 lakh: Taxed at 5%
• Income between Rs. 6-9 lakh: Taxed at 10%
• Income between Rs. 9-12 lakh: Taxed at 15%
• Income between Rs. 12-15 lakh: Taxed at 20%
• Income above Rs. 15 lakh: Taxed at 30%

Old Tax Regime:

• Income up to Rs. 2.5 lakh: Tax exempt
• Income between Rs. 2.5-5 lakh: Taxed at 5%
• Income between Rs. 5-10 lakh: Taxed at 20%
• Income above Rs. 10 lakh: Taxed at 30%

Informing Your Employer

For proactive taxpayers, informing your employer about your preferred tax regime is advisable. However, the Income Tax department also allows you to choose your regime at the time of filing your return.

Crunching the Numbers

To make an informed decision, it's wise to analyze both the old and new tax regimes thoroughly. By comparing the potential benefits and drawbacks, you can select the option that best suits your financial circumstances.

Which is better?

People often wonder about the difference between the old and new tax systems. The new system is suitable for those who don't want many deductions or find tax preparation complicated. This might include people who work independently, like consultants, and can't benefit from certain tax exemptions.

It could also include older folks who don't receive a pension from work and don't qualify for the standard deduction of INR 50,000. However, senior citizens who earn a significant amount of interest income can still benefit from the old system with the newly introduced Section 80TTB, granting them INR 50,000 in interest income.

Both the old and new tax systems have their pros and cons. The old system encourages saving habits among taxpayers. In contrast, the new system is better for employees with lower incomes and investments, as it involves fewer deductions and exemptions.

The new system is safer and simpler, reducing the chances of tax evasion. But since everyone's financial situation is different, it's essential to compare the two systems to find the best fit for each person.

Navigating the complexities of income tax filing can be daunting, but understanding the nuances between the old and new tax regimes can help you make informed decisions. Whether you opt for the familiarity of the old regime or the potential benefits of the new, ensure your choice aligns with your financial goals for a stress-free tax season.

(Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as professional tax advice. Tax laws and regulations may vary based on individual circumstances and jurisdiction. Readers are advised to consult with a qualified tax professional or financial advisor regarding their specific situation before making any decisions related to income tax filing or choosing between the old and new tax regimes. The author and publisher of this article are not liable for any actions taken based on the information provided herein.)