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Old vs. New Tax Regime: Which is Better for ITR Filing Online?

ITR Filing Online

As we all know, ITR Filing Online is mandatory for everyone, and it is the social responsibility of the taxpayers. But tax season brings several questions & decisions for the taxpayers in India. One of the most crucial decisions is to decide whether the old tax regime or the new tax regime will be better for them. Each tax regime has its own set of benefits & limitations. To make an informed decision, you should have to understand both regimes properly. For this, you can also seek the expert guidance of ITR Filing Consultants. Here in this blog, we will discuss the old tax regime as well as the new tax regime.

Before proceeding, you should know about the Income Tax Return & Income Tax Return Filing. 

Income tax Returns are a self-declaration form that the public uses to declare income. On the other hand, ITR Filing is the process used by taxpayers to report their income, deductions, and credits to the government. Tax authorities use this information to calculate the amount of tax payable or the refund due.

New Tax Regime for ITR Filing Online

The new tax regime has been introduced in the 2020 Union Budget and has become the default tax regime for ITR Filing of FY 2023-24. This regime offers lower tax rates but does not allow claiming various exemptions & deductions, including HRA, deductions under Section 80 and many more. It has simplified tax slabs. The tax exemption limit for the new tax regime increased to Rs. 3 Lakhs from Rs. 2.5 Lakhs. Its tax slabs & rates are-

Income Tax Slab

 Income Tax Rate

Up to Rs. 3 Lakhs

Nil

Rs. 3 Lakhs – Rs. 7 Lakhs

5% 

Rs. 7 Lakhs – Rs. 10 Lakhs

10% 
Rs. 10 Lakhs – Rs. 12 Lakhs

15%
Rs. 12 Lakhs – Rs. 15 Lakhs

20%
Above Rs. 15 Lakhs

30%

Old Tax Regime for ITR Filing Online

If we talk about the old tax regime, it has been introduced several years prior to the new tax regime. Taxpayers can claim a number of deductions & exemptions in order to reduce their taxable income by opting for the old tax regime. It includes several deductions, including HRA, LTA, deductions under Section 80, standard deduction, and more. The income tax slabs & rates applicable to the old tax regime are-

Income Tax Slabs

Income Tax Rates

Below 60 Years

60 Years & Above

But below 80 years

Super Senior Citizens (Above 80 Years)
Up to Rs. 2.5 Lakhs Nil – Nil
Rs. 2.5 Lakhs – Rs. 3 Lakhs 5% Nil –
Rs. 3 Lakhs – Rs. 5 Lakhs 5%  5%  Nil
Rs. 5 Lakhs – Rs. 10 Lakhs 20%  20(%)  20% 
Above Rs. 10 Lakhs 30% 30(%) 30%

 

Deductions under the Old Tax Regime include-

  • Standard Deductions
  • Deductions under Section 80, including sections 80C, 80D, 80E, and many more.
  • HRA, i.e. House Rent Allowance
  • LTA i.e. Leave Travel Allowance

These exemptions & deductions will reduce your taxable income, resulting in lower Tax liability.

Old vs. New Tax Regime for ITR Filing Online

In this section of the blog, we will discuss the critical differences between both old & new tax regimes. The main differences are-

Tax Rates to File ITR for FY 2023-24

The significant difference between the two regimes is their respective tax rates. The tax rates in the new regime are comparatively lower than those in the old tax regime. 

  • The old Tax Regime has higher tax rates, but it allows claiming various deductions, due to which tax liability is reduced under this regime.
  • On the other hand, the new tax regime has lower tax rates but does not allow many deductions & exemptions.

Deductions & Exemptions Available for ITR Filing for FY 2023-24

The other significant difference between the two tax regimes is deductions & exemptions. The old tax regime allows more deductions as compared to the new tax regime.

  • The old Tax Regime allows deductions of up to Rs. 1.5 Lakhs under section 80, LTA, HRA, and others.
  • Whereas the new Tax Regime does not allow many deductions & exemptions in exchange for lower tax rates.

Old or New Tax Regime: Which One is Better for ITR Filing Online

The decision of deciding between the old tax regime & new tax regime will depend on the basis of deductions & exemptions made by you as well as your salary or income. 

Let’s have a quick glimpse of which tax regime is better for whom-

Old Tax Regime for ITR Filing

Some situations under which choosing the old tax regime to file Income Tax Return will be beneficial are as given below-

  • If you have some specific deductions under section 80, including EPF, PPF, life insurance, health insurance, etc.
  • When you invest in tax-saving instruments and have home loan interest,
  • It can also be used by self-employed individuals who claim deductions under various sections, including business expenses.
  • If you invest in the tax saving instruments, the old tax regime will reduce your tax liability.

New Tax Regime for ITR Filing

Some situations under which choosing a new tax regime to file Income Tax Return will be beneficial are as given below-

  • If you have few investments in tax-saving instruments and prefer a more straightforward tax calculation.
  • It is better for the higher income earners who do not utilize many deductions and may benefit from the lower tax rates.
  • If your business expenses are lower and you have not invested in tax-saving instruments,
  • When some taxpayers prefer a straightforward tax calculation without the need to track various deductions, the new tax regime will be better for them.

Deductions Allowed under Old & New Tax Regime to File ITR Online for FY 2023-24

Here, we will make a quick comparison between deductions & exemptions allowed in old & new tax regimes-

Particulars  Old Tax Regime New Tax Regime
Income level for rebate Eligibility Rs. 5 Lakhs Rs. 7 Lakhs 
Standard Deduction Rs. 50,000/- Rs. 50,000/-
Rebate u/s 87A Rs. 12,500/- Rs. 25,000/-
HRA (House Rent Allowance) Exemption  Yes  No
LTA (Leave Travel Allowance) Yes No
Entertainment Allowance & Professional Tax Yes No
Interest on Home Loan: Self-Occupied or Vacant Property Yes No
Interest on Home Loan: Let out Property Yes Yes
Deduction under section 80C

(EPF/ LIC/ ELSS/ PPF/ FD/ Children’s Tuition Fee etc.)

 Yes No
Deduction under Section 80D

(Medical Insurance Premium)

 Yes No
Deduction under Section 80E

(Interest on Education Loan)

 Yes No
Deduction under Section 80U

(Disabled Individual)

 Yes No
Deduction under Section 80EEB

(Interest n Electric Vehicle Loan)

 Yes No
Deduction under Section 80G

(Donation to Political Party/ Trust)

 Yes No
Deduction under Section 80TTA & 80TTB

(Saving Bank Interest)

 Yes No
Deduction under Section 80CCH

(Agniveer Corpus Fund)

 Yes Yes
Employee’s Contribution to NPS Yes No 
Employer’s Contribution to NPS Yes Yes
Deduction on Family Pension Income Yes Yes
Gifts u to Rs. 50,000/- Yes Yes
Exemption on Lave Encashment u/s 10(10AA) Yes Yes
Exemption on Voluntary Retirement u/s 10(10C) Yes Yes
Exemption on Gratuity u/s 10(10) Yes Yes
Transport Allowance for a Specially-Abled Person) Yes Yes

 

These are the deductions & exemptions allowed under old as well as new tax regimes. If you are still confused about this, you can contact the CA near me for ITR Filing.

Key Considerations for Choosing the Right Tax Regime For Filing ITR

It would help if you had to keep some points in mind while choosing between the old tax regime & new tax regime. In this section of the blog, we will provide you with some tips for choosing a suitable tax regime.

  • Use online Calculators

You should use the online calculators that have been provided by the various financial websites in order to compute your tax liability under both tax regimes.

  • Consider Future Financial Plans

It will be better to think about your future financial plans & how they align with the benefits offered by each regime.

  • Evaluate Your Deductions

You should calculate the total amount of deductions that you can claim under the old tax regime and compare it with the tax savings under the new tax regime.

  • Consult a Tax Professional

If your financial situation is complex, then the best thing for you is to seek the expert guidance of ITR Filing Consultants.

Final Words

It is your personal decision to choose between the old tax regime & new tax regime as per your financial situation. At the same time, ITR Filing old Tax regime offers numerous deductions & exemptions while the new tax regime provides simplicity & lower tax rates. You should evaluate your income, deductions, and financial goals carefully so that you can make an informed decision. You can also seek guidance from a CA near me for ITR filing, like Legal Pillers. Legal Pillers has a dedicated team of professionals who are always ready to help you. Our team has the expertise to understand your financial situation and provide you with the best advice. So, what are you waiting for? Choose Legal Pillers as your trusted partner and file your ITR properly. 

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