Tax Evolution: Comparing Old vs. New Regimes for Income Tax Returns
The old and new tax regimes in India offer taxpayers different options for computing their income tax liability and filing income tax returns. Here’s a comparison between the old and new tax regimes regarding filing income tax returns
Old Tax Regime
1. Tax Computation
- Under the old tax regime, taxpayers can avail of various deductions and exemptions under different sections of the Income Tax Act, such as Section 80C (investment in specified instruments), Section 80D (health insurance premiums), Section 24 (home loan interest), etc.
- Taxpayers compute their taxable income after deducting eligible deductions and exemptions from their gross total income. The applicable tax slab rates are then applied to compute the income tax liability.
2. Filing Income Tax Return
- Taxpayers filing under the old tax regime can choose from different income tax return (ITR) forms based on the nature and sources of their income, such as ITR-1, ITR-2, ITR-3, etc.
- They need to report their income, deductions, and tax liability accurately in the chosen ITR form and file their income tax return within the due date specified by the Income Tax Department.
New Tax Regime
1. Tax Computation
- Under the new tax regime, taxpayers are not eligible for most deductions and exemptions available under the old tax regime. Instead, they are subject to lower tax rates applicable to different income slabs.
- Taxpayers can choose to opt for the new tax regime if they prefer the simplicity of lower tax rates without the hassle of managing various deductions and exemptions.
2. Filing Income Tax Return
- Taxpayers under the new tax regime also need to file their income tax returns using the applicable ITR forms, similar to those under the old tax regime.
- They report their income, deductions (if any), and tax liability in the chosen ITR form and file their income tax return within the due date specified by the Income Tax Department.
FAQ's
The old tax regime allows for various deductions and exemptions, resulting in a higher number of tax-saving options but potentially higher tax rates. In contrast, the new tax regime offers lower tax rates but limits the availability of deductions and exemptions.
The choice between the old and new tax regimes depends on individual preferences, financial situation, and tax-saving goals. Taxpayers who benefit from significant deductions and exemptions may prefer the old regime, while those seeking simplicity and lower tax rates may opt for the new regime.
Yes, taxpayers have the flexibility to switch between the old and new tax regimes each year based on their preference and financial circumstances. However, once the choice is made for a particular financial year, it remains applicable for that year.