When it comes to filing your Income Tax Return (ITR), the most common question we get at UKUBERA is: "Should I opt for the Old Tax Regime or the New Tax Regime?"
Starting FY 2023-24, the government made the New Tax Regime the default option. However, you still have the flexibility to choose the Old Regime if it helps you save more tax.
Let’s break down everything you need to know.
1. The New Tax Regime: Simplified & Default
The New Tax Regime was introduced to simplify taxes by lowering tax rates, but at the cost of giving up most deductions (like 80C, 80D, HRA, etc.).
Key Highlights:
- Tax-Free Income up to ₹7 Lakhs: Due to the rebate under Section 87A, if your taxable income is ₹7,00,000 or less, your tax liability is literally ZERO.
- Standard Deduction: Salaried individuals are now eligible for a ₹50,000 standard deduction under the new regime as well.
- No Deductions: You cannot claim House Rent Allowance (HRA), Leave Travel Allowance (LTA), or Section 80C (PPF, ELSS, LIC) investments.
2. The Old Tax Regime: Maximize Your Deductions
The Old Tax Regime has higher tax slab rates but allows you to claim over 70 different exemptions and deductions.
Key Highlights:
- Tax-Free Income up to ₹5 Lakhs: The rebate under Section 87A applies only up to ₹5 Lakhs.
- Section 80C: Deduct up to ₹1.5 Lakhs by investing in PPF, ELSS, EPF, or paying life insurance premiums.
- Section 80D: Deduct health insurance premiums for yourself and your parents (up to ₹75,000).
- Section 24(b): Deduct up to ₹2 Lakhs for interest paid on a home loan.
Which One Should You Choose?
As a general rule of thumb:
If your total eligible deductions (80C, 80D, HRA, Home Loan Interest) exceed ₹3.75 Lakhs, the Old Regime is typically better for you. If you have few investments and rent is low, the New Regime is almost always superior.
Try Our Free Calculator
We built an intelligent calculator that runs the exact math for you in 3 seconds. Try our Income Tax Calculator to compare both regimes side-by-side!
Still confused? Our CA-led team at UKUBERA is here to help. Book a consultation today and let us handle your tax planning.