Old Tax Regime vs New Tax Regime: Understanding the Differences

In the ever-evolving landscape of taxation, the introduction of the New Tax Regime has brought significant changes for taxpayers. While designed to simplify the tax structure and streamline processes, individuals may find themselves pondering whether the benefits of the new regime truly align with their financial goals. For those considering a return to the familiarity of the Old Tax Regime, understanding the procedures for switching back is paramount.

Last week, the Income Tax Department unveiled tax return forms for individuals. In addition to requesting various details for tax exemption claims, these forms specify the new tax regime as the default for the assessment year 2024-25 (reflecting income for the financial year 2023-24). However, if opting to revert to the old regime, individuals are required to complete a new form: Form 10-IEA.

New Form To Change Tax Regime?

The new tax regime is automatically selected by default. Should an assessee wish to opt out of this regime, they must file a declaration form. In the newly introduced tax return forms, individuals who wish to switch from the default ‘Old Regime’ to the new tax regime must fill out a separate form. Failure to do so will result in their tax computation being processed under the new regime by default.

According to a report by Moneycontrol, clarity is still pending from the IT department regarding who is eligible to fill out this form: whether it applies to everyone or solely to businessmen and self-employed individuals. Tax professionals are currently grappling with confusion regarding the mandatory nature of Form 10-IEA for all individuals. Clarity regarding the procedure for opting out of the tax regime is still awaited.

Purpose of Form 10-IEA

Form 10-IEA is used specifically by individuals with income from business or profession who want to opt out of the new tax regime and choose the old tax regime. However, clarity is still awaited.

Key Points:

Deadline File Form 10-IEA before the due date for filing your ITR for the relevant financial year.
Download You can download the latest version of Form 10-IEA from the official website of the Income Tax Department.
Filing Submit the filled form electronically through the e-filing portal of the Income Tax Department.

Key highlights of the new system include an elevation in the basic exemption threshold and enhanced tax rebates. Taxpayers have the option to choose between the previous tax regime and the updated one. The modifications were specific to the new tax regime, leaving the old tax regime unchanged. Despite the new tax regime becoming the default option starting from 2023-24, taxpayers retain the flexibility to select the old one if they prefer.

Comparing Tax Regimes

Choosing between the new and old tax regimes can be tricky, especially with the differences in tax slabs. Let’s break down the key points to help you understand:

Old Tax Regime

Tax Slab Income Range Tax Rate
1 Up to Rs 2.5 lakhs NIL
2 Rs 2.5 lakhs to Rs 5 lakhs 5%
3 Rs 5 lakhs to Rs 10 lakhs 20%
4 Above Rs 10 lakhs 30%

In the old tax regime, there are seven tax slabs, with the liability going from NIL to 30 per cent of the income.

Under the new income tax regime, the number of slabs has been reduced:

New Tax Regime

Tax Slab Income Range Tax Rate
1 Up to Rs 3 lakhs NIL
2 Rs 3 lakhs to Rs 6 lakhs 5%
3 Rs 6 lakhs to Rs 9 lakhs 10%
4 Rs 9 lakhs to Rs 12 lakhs 15%
5 Rs 12 lakhs to Rs 15 lakhs 20%
6 Above Rs 15 lakhs 30%

Surcharge applies to certain income brackets:

  • 10%: Above Rs 50 lakhs
  • 15%: Above Rs 1 crore
  • 25%: Above Rs 2 crore (reduced from 37% in 2023)

The best regime for you depends on your income, investments, and deductions. If you have a simple income structure and limited deductions, the new regime might be more beneficial. However, if you have significant investments or claim many deductions, the old regime might save you more tax. Before switching, carefully consider the pros and cons of each regime based on your income and deductions. It’s recommended to consult a tax advisor to determine the most suitable regime for your circumstances.


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