Understanding New vs. Old Tax Regime for AY 2024-25. The landscape of income tax filing in India has seen significant changes with the advent of the Assessment Year (AY) 2024-25. The introduction of the new tax regime as the default option under Section 115BAC has raised several questions among taxpayers. To navigate through these changes effectively, let’s delve into some frequently asked questions (FAQs) and their implications:

1. Overview of New vs. Old Tax Regime

The Finance Act 2023 amended Section 115BAC to make the new tax regime the default option for individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and Artificial Juridical Persons (AJPs). Taxpayers now have the choice to opt out of the new regime and revert to the old tax structure if it better suits their financial circumstances. GST Registration.

Key Points:

• New Tax Regime: Offers lower tax rates but limits deductions and exemptions.


• Old Tax Regime: Allows various deductions and exemptions, potentially resulting in higher taxable income but providing more tax-saving avenues.

2. FAQs on New vs. Old Tax Regime

Q1: What is the difference between the old and new tax regimes?

• A: The old tax regime follows traditional tax slabs with higher rates but allows deductions like HRA, section 80C, 80D, etc. The new regime offers lower tax rates but restricts deductions to a few specified under Section 115BAC.

Q2: Which is better between the old tax regime and the new tax regime?

• A: The choice depends on individual financial situations. Taxpayers should compare both regimes using tools like the Income and Tax Calculator on the Income Tax Portal to determine which offers a lower tax liability.

Q3: Do I need to inform my employer about my chosen tax regime?

• A: Yes, it is crucial to inform your employer about opting out of the new tax regime if you wish to avail deductions under the old regime. Failure to do so means the employer will deduct taxes based on the default rates under Section 115BAC.

Q4: Can I claim HRA exemption in the new tax regime?

• A: No, the HRA exemption is not available under the new tax regime. It is applicable only under the old tax regime.

Q5: Am I eligible for the Rs. 50,000 standard deduction in both regimes?

• A: Yes, the standard deduction of Rs. 50,000 is available in both the old and new tax regimes from AY 2024-25 onwards.

Q6: Can I claim deductions under Chapter-VIA (like 80C, 80D, etc.) in the new tax regime?

• A: No, Chapter-VIA deductions are not allowed in the new tax regime except for specific deductions mentioned under Section 115BAC. Taxpayers opting for deductions should choose the old regime while filing their ITR accordingly.

Conclusion

Navigating through the complexities of the new vs. old tax regime choices requires a clear understanding of your financial situation and tax implications. Choosing the right regime involves weighing the benefits of lower tax rates against the availability of deductions and exemptions. Taxpayers are encouraged to use online tax calculators and seek professional advice if needed to make an informed decision. GST Filing.

Understanding these FAQs will empower you to make the best choice for your financial planning in AY 2024-25. Stay informed, compliant, and proactive in managing your tax obligations under the evolving Indian tax laws.

This blog aims to clarify the nuances surrounding the new tax regime default and the options available to taxpayers, ensuring a smoother filing experience in the upcoming assessment year.