New Tax Regime vs. Old Tax Regime
- by legalbabu
- Updated Mar 31, 2025
- 3 mins read
The Finance Act 2023 has made the new tax regime under Section 115BAC the default tax regime for individuals, HUFs, AOPs (excluding co-operative societies), BOIs, and Artificial Juridical Persons from AY 2024-25 onwards. However, taxpayers still have the option to opt out and choose the old tax regime.
Non-business taxpayers can make this choice annually in their ITR, while business taxpayers must submit Form 10-IEA before the due date under Section 139(1) to opt out or re-enter the new regime. Below are some frequently asked questions (FAQs) to help taxpayers understand the differences and implications of both tax regimes.
What is the difference between the old and new tax regime?
The old tax regime provides multiple exemptions and deductions (e.g., HRA, 80C, 80D), whereas the new tax regime offers lower tax rates but limited deductions.
Which tax regime is better?
It depends on individual financial situations. Taxpayers should compare tax liabilities under both regimes using the Income Tax Calculator on the Income Tax Portal.
Do employees need to inform their employers about their chosen tax regime?
Yes, employees must inform their employers; otherwise, tax will be deducted under the default new tax regime. However, final selection occurs while filing ITR.
Can salaried taxpayers claim HRA exemption in the new tax regime?
No, the HRA exemption under Section 10(13A) is available only under the old tax regime.
Is the Rs. 50,000 standard deduction available in the new tax regime?
Yes, from AY 2024-25, a standard deduction of Rs. 50,000 is available in both tax regimes.
Can deductions under Chapter VI-A (80C, 80D, etc.) be claimed under the new regime?
No, most deductions under Chapter VI-A are not available except for 80CCD(2), 80CCH, and 80JJAA.
Can interest on a home loan for self-occupied property be deducted under the new tax regime?
No, this deduction is only available in the old tax regime.
Are senior citizens entitled to special tax benefits under the new tax regime?
No, while the old tax regime provides a higher exemption limit (Rs. 3 lakh for seniors, Rs. 5 lakh for super seniors), the new regime provides a tax rebate on incomes up to Rs. 7 lakh.
Is there a difference in Section 87A rebate between the two regimes?
Yes, in the old regime, the rebate applies up to Rs. 5 lakh of income, whereas in the new regime, it applies up to Rs. 7 lakh with a maximum rebate of Rs. 25,000.
Do I need to file Form 10-IEA to opt for the old tax regime?
Business taxpayers must file Form 10-IEA to opt for the old regime. Non-business taxpayers can select the old regime directly in the ITR.
Can I switch between tax regimes every year?
Business taxpayers can switch only once. Non-business taxpayers can switch every year.
If I previously opted out of the new tax regime, will I automatically be in the old regime for AY 2024-25?
No, the new regime is the default from AY 2024-25. Business taxpayers must submit Form 10-IEA again to opt for the old regime.
Can Form 10-IEA be withdrawn once filed?
No, once submitted, it cannot be revoked in the same year.
Which form should I use to opt out of the new regime in ITR-5?
AOPs, BOIs, and Artificial Juridical Persons must file Form 10-IEA. Manufacturing co-operative societies must file Form 10-IFA.
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