ITR filing: How the new tax regime impacts your taxes – 6 key things to know | Mint

Taxpayers are required to pay their income tax as per the New Tax Regime (NTR) from FY 2023-24 onwards after it became the default regime.

This means that if you don’t opt for a specific tax regime, your income tax will be computed on the new tax regime.

Notably, the new tax regime enables you to compute income tax at a relatively lower slab rate, but in return, you must forgo most of the exemptions that are offered against your investments.

Salaried taxpayers must inform their employers about the regime they are opting for. And once they choose a regime, they cannot change it during the same financial year.

Meanwhile, individual taxpayers with non-business income are free to switch between the old and new tax regimes every year. Let’s understand more about the new tax regime before we embark on the next calendar year.

New Tax Regime: 6 key points to remember

I. Tax slab and deductions: Taxpayers are charged tax at a lower rate in the new regime, but they are deprived of most of the deductions, such as the 80C deduction offered against the investment made towards PPF, NSC, ULIP, among others.

For instance, under the old tax regime, a 30 per cent tax bracket kicks in as you cross the ₹10 lakh threshold, whereas, in the new tax regime, the threshold is ₹15 lakh.

II. Which one is better for you: Often, taxpayers wonder whether the old regime is better or new. This is a function of several factors, such as what all investments you have made and what tax bracket you fall under and so on.

Effectively, this varies from case to case. For some taxpayers, the old regime is better since they have invested in a number of tax-saving instruments, while for others, the new regime makes more sense.

Ideally, one can use the Tax Calculator to find an answer.

III. Moving back to the old regime: There could be a situation where you opted for the new tax regime but now want to opt for the old tax regime for any reason whatsoever. It is permitted, but this shift can happen only once a year.

Taxpayers with a business or professional income will not be eligible to choose between the two regimes yearly.

Once they opt out of new tax regime, they have only one chance for switching to new regime. Once they move back to the new regime, they won’t be permitted to opt for the old regime in future.

IV. For salaried employees: Since salaried taxpayers pay monthly tax (via TDS) through their employers. So, it is incumbent upon them to inform their employers about the tax regime they are opting for.

One must be mindful that if you fail to inform your employer, it will be presumed that you have opted for the new tax regime, which is the default regime.

V. How to opt for the old tax regime: Taxpayers who have a business or professional income must submit Form 10-IEA if they wish to pay income tax as per the old tax regime.

Meanwhile, taxpayers who do not have income from business or profession can simply tick the “Opting out of new regime” in the ITR form without having to file Form 10-IEA

VI. Standard deduction: Although most deductions are not permitted, standard deduction of ₹50,000 is available in both the tax regimes: old as well as new from AY 2024-25 onwards.