The new income tax regime was introduced in the budget of FY21. Since then the government has clearly shown its preference for the new tax regime that is far simpler since it does not allow for most deductions but simultaneously offers a lower tax rate at the lower income levels. From AY24-25, the new system has become the default system.
Who might prefer the old regime
But some taxpayers might still find the old tax regime preferable and want to return to the old system after migrating to the new structure one or two years ago. This could happen if someone has heavily invested in various instruments that allow for income tax deductions such as life insurance, health insurance, PPF, ELSS, NPS etc.
The old tax regime also provides exemptions such as house rent allowance (HRA) and Leave Travel Allowance LTA. The new regime does not offer these benefits.
Income Tax rules permit people without income from business to alternate between the old tax regime and new tax regime once a year. However, for those earning their bread from a business or a profession, no such flexibility is provided.
ITR filing: How to move to old tax regime
To move to the old tax regime, a taxpayer must submit Form 10-IE along with their income tax returns. Experts point out that this must be performed before the deadline of July 31, 2024.
The point to note here is that after the form 10-IE is submitted, a 15-digit number will be issued to acknowledge the receipt of the application.
This number must be mentioned by the taxpayer when the ITR has to be submitted.
New tax regime becoming popular
However, tax experts have said that this year most ITRs are being submitted under the new tax regime. “A large number of taxpayers are filing income tax under the new tax regime,” said Himadri Mukhopadhyay, secretary, Income Tax Bar Association, Calcutta.
One reason is that often the new regime is proving to have a lower tax liability, especially at the lower and middle income brackets.
Can you switch back to old tax regime while filing ITR: The new tax system has been fixed as the default system from this year. Some individual taxpayers might, however, still want to return to the old one since it allows a multitude of deductions and exemptions. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
