New or Old Tax Regime: While filing Income Tax Returns (ITR), taxpayers get stuck with a dilemma of having to choose between opting for the old or the new tax regime. The government has made the new tax regime the default one, where they provide tax-exempt income of up to ₹12 lakh. But taxpayers also have the option to switch to the old regime if they so wish. Such adaptability enables individuals to shift between the two regimes depending on their economic conditions.
For individuals with non-business income, like salary, interest, or rent, the terms are comparatively liberal. They can alternate between the old and new tax regimes on a year-by-year basis. But the choice should be exercised before the deadline for filing ITR. In case of delayed filing of the return, the default new tax regime will be applicable. Salaried taxpayers can assess their tax liability for both regimes each year to make a well-informed decision.
Business or professional income taxpayers are subject to more stringent rules. They can only shift from the new to the old regime once in their life. Once they choose to opt out of the new regime, they cannot shift back to it. They have to file Form 10-IEA prior to filing their ITR for this change. The constraint highlights the need for business taxpayers to plan carefully.
The due date for ITR filing by those who don’t need an audit is July 31, 2025, for FY 2024-25. A belated return can be filed on or before December 31, 2025, with a late fee. People who file in time but want to switch their tax regime can file a revised return prior to the due date. The flexibility provides enough time to ensure that people get enough time to minimize their tax liability.
Also Read: Income Tax: Is it possible to switch tax regime while filing ITR?
The decision between the two regimes of taxation lies in the hands of individual financial positions. The old system is advantageous with different exemptions and deductions like Section 80C (EPF, PPF, Life Insurance) and Section 80D (Medical Insurance). The new regime provides simpler tax slabs with less deduction. Taxpayers have to calculate both ways their taxes to see which is beneficial to them. By knowing the regulations and assessing their financial requirements, taxpayers are able to make a well-informed choice and optimize their savings.
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