Income Tax Regime Dilemma – New VS. Old

Feeling confused about the new and old income tax regimes in India? You're not alone! This blog, crafted with the help of FAQs by CA Vikas Jain, aims to demystify the intricacies of both options and empower you to make an informed decision.

Here's what you'll find inside:

• Clear explanations of the new and old tax regimes, including their key features, tax slabs, and deductions.
• In-depth analysis of the pros and cons of each regime, helping you understand which one suits your income profile and financial goals better.
• Step-by-step guidance on choosing the right regime and navigating the filing process.
• Expert insights from CA Vikas Jain, addressing frequently asked questions (FAQs) to ensure you have all the information you need.

Confused about standard deductions, rebates, or surcharge rates? We've got you covered! This blog will be your one-stop shop for all your income tax regime queries.

Stay tuned for informative articles and expert advice to help you optimize your tax outgo!

Welcome to the Financeseva.com channel, in today's video we will discuss about the new and old regimes of income tax

Changes made in Section 115BAC of the Income Tax Act, 1961 by the Financial Act of 2023 can be considered an important amendment in the tax rules. These changes have been brought not only to make the tax filing process easier, but also to increase transparency and accountability in the tax system.

With the Financial Act of 2023, important changes have been made in Section 115BAC of the Income Tax Act, 1961. As a result, the New Tax System has been made the default option from fiscal year 2024-25.

Income tax slab rates in the old regime are as follows

It is important to note that all eligible deductions and exemptions are available only in the old regime.

Now let's understand the difference between New Tax Regime from AY 2024-25 and New Tax Regime for AY 2021-22 to AY 2023-24

Now let's understand each of these in detail

1. Default Tax Regime

Under Section 115BAC of the Income Tax Act, 1961, the New Tax Regime is now applicable as the default tax regime from Assessment Year 2024-25. This is applicable to (Individuals), (HUFs), Hindu Undivided Family, (AOPs) Association of Persons, (BOIs) Body of Individuals, and (artificial juridical persons). However, it is not applicable to (partnership firms), (companies), and (cooperative societies).

2. Option to Opt Out:

If you pay tax on income from business or profession and you want to opt out of the new tax regime and choose the old tax regime, then you will have to fill form 10-IEA under section139(1) of the Income Tax Act before the fixed due date.

3. Flexibility for Non-Business Taxpayers:

Taxpayers who do not have income from business or profession can choose the tax regime of their choice while filing their income tax return. This is done under section139(1). It is important to note that you can change your chosen tax regime every Assessment Year.

4. Impact of Previous Year’s Regime:

The tax regime chosen for Assessment Year 2023-24 does not affect the process for Assessment Year 2024-25. This means that even if a taxpayer has filed an income tax return under the old or new tax system for fiscal year 2023-24, whether or not they have income from business or profession, the default option for Assessment Year 2024-25 will be the new tax regime.

5. Consequences of Failure to opt out of New Regime:

Taxpayers who have income from business or profession who forget to fill form 10-IEA or who do not have such income or forget to select their preferred tax regime in their income tax return will not be applicable to choose the old tax regime for that Assessment Year and tax will be levied on them as per the default new tax regime. The time limit for this is mentioned under section 139(1) of the Income Tax Act.

For people with income from business or profession, it is not necessary that the income tax return be filed under section 139(1) within the due date. This means that even if a taxpayer has filled form 10-IEA to opt out of the default new tax regime (meaning opting out of section 115BAC), but forgets to file their income tax return under section 139(1) of the Income Tax Act and later files a delayed income tax return under section 139(4) or 139(8A), they can still pay tax according to the old tax regime based on the form 10-IEA filed within the due date mentioned under section 139(1).

6. Changing Option in Revised Return:

Once a selection is made, according to the provisions of section 115BAC(6) of the Income Tax Act, it cannot be changed for the same Assessment Year. Even filing a revised income tax return under section 139(5) does not allow permission to change this option.

7. Changing Option in Subsequent Assessment Year:

The decision to opt out of section 115BAC for Assessment Year 2024-25 does not affect the upcoming Assessment Years for some taxpayers.

8. Taxpayers with income from business or profession: Once they choose the old tax regime, they cannot switch back to the new tax regime within the same year. However, they can opt out of the old tax regime again in the next Assessment Year (like AY 2025-26) by filing form 10-IEA, but after that they will not be eligible to choose the old tax regime ever again.

9. Taxpayers without income from business or profession: For them, each year's decision is independent of the previous year. These taxpayers have the flexibility to choose between section 115BAC (new regime) and the old tax regime in the income tax return form itself.

These provisions have been introduced to simplify the tax filing process and provide clear information to taxpayers about their tax regime selection.

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