Income Tax Regime: Individual taxpayers can change the tax regime, which of the new and old regime is beneficial for you?

New income tax regime has become more attractive because now there is no need to pay tax on annual income up to Rs 12 lakh. Finance Minister Nirmala Sitharaman announced this in the budget on February 1, 2025. The new rule has come into effect from April 1

Income tax regime: The new financial year has started from 1 April. Individual taxpayers are allowed to switch income tax regimes. They can choose their tax regime once every financial year. Employed people have to inform their company’s finance department in April which regime they want to use. Only after this, the company’s finance department deducts TDS from the employee’s salary every month. If you have used the old income tax regime in the previous financial year, then you can use the new regime in this financial year. You will have to give this information to your company’s finance department.

New regime is now default regime

It is important to understand that now the default regime has become the new regime of Income Tax. This means that the salaried employee will have to tell the finance department that he wants to use the old regime. If he does not tell, then the finance department will assume that the employee wants to use the new regime. Then from April it will start deducting TDS from your salary according to the slab of the new regime.

TDS according to the regime

The finance department of the company asks the employed people about their tax regime at the beginning of the financial year because it has to deduct TDS from the salary every month. The company deposits the TDS amount deducted from the salary of the employees with the Income Tax Department every quarter. The company deducts TDS from the salary of the employee every month so that the employee does not have to pay the entire tax in lump sum. Paying lump sum tax will put a lot of burden on the employees. To save the employee from this, companies deduct a little tax from the salary of the employee every month.

Special features of the new regime

In the new income tax regime, the benefit of most deductions is not available. Only two types of deductions are allowed. First, there is a standard deduction of Rs 75000. Second, there is a deduction available on the employer’s contribution to the employee’s NPS account under NPS. The employer can contribute up to 14% of the basic salary (plus DA) to the employee’s NPS account. Deduction is allowed on this. It is important to note that most deductions are not allowed in the new regime, but tax rates are lower.

Tax Slab (New Tax Regime)

Tax Slabs Tax Rate
Up to Rs 3 lakh NIL
Rs 3 to 7 lakh 5 percent
7 to 10 lakh rupees 10 percent
10 to 12 lakh rupees 15 percent
12 to 15 lakh rupees 20 percent
Above Rs 15 lakh 30 percent

 

Benefits of the old regime

Many types of deductions are allowed in the old regime. These include Section 80C, Section 80D, Section 24B and HRA. About a dozen investment options come under Section 80C. By investing in these, a maximum deduction of Rs 1.5 lakh can be claimed in a financial year. Under Section 80D, deduction is available on health insurance premium. A person below 60 years of age can claim a deduction of Rs 25,000 on the premium of a health policy purchased for himself and his family. Apart from this, he can claim a deduction of Rs 50,000 on the premium by purchasing a health policy for his elderly parents (60 years of age or above). Under Section 24B, a maximum deduction of Rs 2 lakh is allowed on the interest on home loan.

Tax Slabs Tax Rate
Up to Rs 2.50 lakh NIL
Rs 2.5 to 5 lakh 5 percent
5 to 10 lakh rupees 20 percent
10 to 50 lakh rupees 30 percent

 

Which regimen is right for you?

Experts say that the old regime of income tax is good only for those who take advantage of all types of deductions. If a taxpayer does not take full advantage of HRA or home loan deduction, deduction under section 80C and deduction under section 80D, then the new regime of income tax is beneficial for him. This regime is easy. It is also easy to calculate tax in it. The tax rates are also low in it.

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