Which is better for salaried persons, old or new tax regime?

Gefragt von: Toni Haag
sternezahl: 4.5/5 (3 sternebewertungen)

Neither the old nor the new tax regime is universally better for all salaried persons; the ideal choice depends entirely on your income level, the amount you invest in tax-saving schemes, and the specific deductions you are eligible to claim.

Which one is better, old vs new tax regime?

Income up to ₹12 lakh is tax-free under the new regime, due to rebate. Beyond ₹25 lakh, the old regime is better if deductions exceed ₹8 lakh. Between ₹12 - 25 lakh, the choice depends on your deduction level.

Which tax regime is better for a salaried person?

In general, if you have many tax-saving investments and expenses, the old tax regime is likely to be more beneficial for you. However, if you do not have many tax-saving investments or expenses, the new tax regime may be more beneficial for you.

What is the disadvantage of the new tax regime?

Disadvantages. The new tax regime does not allow exemptions. This will lead to an increase in the overall taxable amount of taxpayers. For taxpayers with income up to INR 15 lakhs, the new tax regime has lower income taxes but this is at the sacrifice of exemptions and deductions available under the previous tax regime ...

Can a salaried person change from a new regime to an old regime?

Once they opt out of new tax regime, they have only one chance for switching to new regime. Once they switch back to the new regime, they won't be able to choose old regime anytime in future. An individual with non business income can switch between the new and old tax regimes every year.

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What are the benefits of the new tax regime?

Let's find out.

  • Lower Tax Rates. ...
  • Lesser Exemptions. ...
  • Comparison Between Old and New Regimes. ...
  • Eligibility for Senior Citizens. ...
  • Impact on House Rent Allowance (HRA) ...
  • No Deductions for Life Insurance Premiums. ...
  • Standard Deduction in New Tax Regime. ...
  • Switching Between Regimes.

Can you keep switching between old and new tax regimes?

Can I switch between the old and new tax regimes every year? Salaried individuals can switch annually by informing their employer. Business income earners can switch only once and must stay in the chosen regime unless they cease business activities.

Is there any benefit for the old tax regime?

Old Tax Regime is beneficial to: Those with significant investments in tax-saving instruments. Individuals with high deductions and exemptions, like medical insurance, home loans, and children's education expenses.

Do we get a refund in the new tax regime?

New Regime

For FY 2024-25, if an individual's total taxable income is up to Rs.7 lakh, he will be eligible for rebate up to Rs.25,000. However, for FY 2025-26, if an individual's total taxable income is up to Rs.12 lakh, he will be eligible for rebate up to Rs.60,000.

Which regime is better for 30 LPA?

Key takeaway to save tax on salary above 30 Lakh

If you have significant tax-saving Tax deduction, opt for the old regime. Salaried employees could claim benefits like HRA, LTA, conveyance allowance, daily allowances, medical reimbursement, and *Tax deduction under Section 80C under the old regime.

Can NRI opt for old tax regime?

Residents, as well as non-residents, have the same tax slab rates. Both have the flexibility to choose between the existing tax regime and the new tax regime slabs. Each option offers distinct advantages and understanding them can help you make an informed decision that aligns with your financial goals.

How to avoid 40% tax?

How to avoid paying higher-rate tax

  1. 1) Pay more into your pension. ...
  2. 2) Reduce your pension withdrawals. ...
  3. 3) Shelter your savings and investments from tax. ...
  4. 4) Transfer income-producing assets to a spouse. ...
  5. 5) Donate to charity. ...
  6. 6) Salary sacrifice schemes. ...
  7. 7) Venture capital investments.

Can I switch regimes every year?

Salaried taxpayers can switch regimes every financial year. Business and professional taxpayers can switch only once after opting for the new regime. After switching back to the old regime, the new one is barred unless business income ceases. Depreciation, losses, and deductions play a decisive role in this choice.

Which tax regime is better for NRIS?

The old tax regime features high slab rates and allows several deductions and exemptions. It includes the Section 80C, 80D, and home loan interest. The new tax regime offers low tax slabs with limited exemptions/deductions, simplifies compliance, and reduces planning flexibility.

How can I save tax in a new regime?

This exemption is easy to understand and thus an attractive choice for salaried persons.

  1. Buy a health insurance policy.
  2. Park your money in government schemes.
  3. Buy life insurance plans.
  4. Investment options under section 80C.
  5. Old tax regime.
  6. New tax regime.

Is 80C allowed in new regime?

Section 80C provides deductions up to Rs.1.5 lakhs on various investments and expenses. These include deductions for life insurance premiums, PPF, home loan principal repayment, ELSS mutual funds, Sukanya Samriddhi Yojana, and many more. Deduction under section 80C is not available under the new regime.

What are the drawbacks of the new regime?

A key feature of the new regime is the limited scope for deductions. Taxpayers cannot claim most common deductions available under the old regime, including Section 80C (investments in LIC, PPF, ELSS, etc.), Section 80D (health insurance premiums), Section 80E (education loan interest), and House Rent Allowance (HRA).

How do I get the biggest refund on my taxes?

How to maximize tax return: 4 ways to increase your tax refund

  1. Consider your filing status. Believe it or not, your filing status can significantly impact your tax liability. ...
  2. Explore tax credits. Tax credits are a valuable source of tax savings. ...
  3. Make use of tax deductions. ...
  4. Take year-end tax moves.

When should I go for a new tax regime?

If your income is ₹20 lakhs, the best tax regime depends on your eligible deductions: Choose the old regime if your tax-saving deductions exceed ₹3.75 lakhs. Opt for the new regime if your deductions are less than ₹3.75 lakhs.

What are the disadvantages of the old tax regime?

One of the biggest disadvantage of the old tax regime is its complex tax structure that includes multiple exemptions and deductions. This can be challenging for taxpayers to understand and comply with.

Can taxpayers switch between old and new tax regimes?

Yes, if you are a salaried individual, you can switch tax regimes every year, but if you earn income from a business or profession, you can do so only once.

How can I reduce my taxable income?

What to do at tax time

  1. Contribute to tax-advantaged retirement accounts to maximize deductions. Traditional IRAs, 401(k)s, 403(b)s, and 457(b)s accounts allow for a dollar-for-dollar reduction of taxable income for contributions made. ...
  2. Compare standard deduction to itemized deductions. ...
  3. Consider tax credits.

Which is better, old or new tax regime in 2025?

Income up to Rs 12 lakhs can be tax-free under the new regime due to increased rebate from FY 2025-26. The aforesaid rebate is not applicable for income taxable at special rates. eg., capital gains, online gaming income, etc. Under the old regime, income up to Rs 5 lakhs can be effectively tax-free.

Do we need to submit proof for new tax regime?

No, TDS (Tax Deducted at Source) is calculated based on the income declared by the employer in Form 16, along with the applicable tax slabs. The absence of a proof submission under the new regime does not affect TDS calculation. Employees will still have TDS deducted correctly by the employer.