chapter 14

Income Tax Return Filing - New   Vs Old Regime - FY 2024-25 -Part 2Part 2 :In the Part 1 of this article I have discussed the key amendments made in the Finance Act, 2024 in the new tax regime, Chosing between the new and old regime, rationale behind for transitioning to new regime etc. In this Part 2 of this article I want highlight the key difference the two regime in details along with other important factors in details for your information.5. Key Differences between the Old and New Regimes.i). Deductions and Exemptions:   - Old Regime: Allows numerous deductions and exemptions (HRA, LTA, housing loan interest on Self occupied house etc.).   - New Regime: Limited to standard deduction  of Rs. 75000, Employer's contribution to NPS  up to 14% of Salary and interest on Home loan only in case of let out property.ii). Tax Rates:   - Old Regime: Higher tax slabs, but potential to reduce taxable income through deductions and exemptions   - New Regime: Lower tax rates (5%, 10%, 15%, and 20%) for income up to Rs 15.00 lakh.iii). Basic Exemption Limit:   - Old Regime: Generally starts from Rs 2.50 lakh, Rs. 3.00 lakh for Senior Citizens and Rs. 5.00 lakh for Super Senior Citizens.   - New Regime: Starts from Rs 3.00 lakh for all.iv)  Tax Rebate:   - Old Regime: Limited to incomes up to Rs 5.00 lakh, without any marginal relief.   - New Regime: Extended to incomes up to Rs 7.00 lakh with marginal relief.6.  Choosing Between the Regimes:i)  Old Regime Suitability: Better for individuals who can claim substantial deductions and exemptions  thereby reducing their taxable income significantly.ii) New Regime Suitability: a). Ideal for those who prefer a simplified tax structure and may not have many deductions to claim or not affordable to invest more and more in  various  Tax Saving Investments.   b).  It is always beneficial to the individuals having income of more than Rs. 500 lakh, as the Surcharge is restricted to 25% as against 37% under old regime. 7.  Decision Factors :i). Deductions and Exemptions: The old regime is more beneficial for those who have significant eligible deductions and exemptions like housing loan interest , LTA, HRA, Elegible investments, Medical Insurances and Donations etc  ii). Simplicity: The new regime is simpler and may be beneficial for those who do not wish to invest in tax-saving instruments or do not have many deductions.iii) . Income Level: For higher income levels, the savings through deductions in the old regime might offset the lower rates in the new regime.iii) Stratigic decision:  Taxpayers should evaluate their eligibility for various deductions and exemptions under the old regime and compare it with the simplified rates of the new regime to determine which is more financially beneficial. Tax planning tools and calculators can aid in this comparative assessment.8.  Option to choose between old and new  regimes :i) In case of non-business casesoption to choose the regime can be exercised every year directly in the ITR to  be filed on or before the due date specified under section 139(1). ii)  In case of eligible taxpayers having income from business and profession and wants to opt out of new tax regime, the assessee would be required to furnish Form-10-IEA on or before the due date u/s 139(1) for furnishing the return of income. Also, for the purpose of withdrawal of such option i.e. opting out of old tax regime shall also be done by way of furnishing Form No.10-IEA. But, for returns to be filed after due dates, no option to file under old regime, unless you funished form 10IEA, before due dates for filing your return.iii)  However, in case of eligible taxpayers  having income from business and profession, the option to switch to old tax regime and withdraw the option in any subsequent Assessment Year is available only once in their lifetime.9. Summary :i) Decide between the new and old tax regimes based on your specific financial situation.ii) Ensure timely filing to avoid penalties and loss of benefits.iii) Consider the long-term implications of switching to old tax regimes, especially if you have business or professional income. iv) From the last financial year 2023-24 onwards, for the persons having income from business and profession,  it is always better to file under  the default new regime, unless you have more tax benefits or other concerns like business losses.  If you continue with the default new regime, you will have two more options for opting to old regime and once again coming back to new regime. v)  For a normal tax payer with income more than Rs 15 lakhs but not more than Rs 500 lakh, old regime may be beneficial only if additional deduction and exemption are more than Rs. 4.33 lakh.The End.CA V. K. S. Shetty, Bangalore10/01/2025