The
Income Tax Return (ITR) filing deadline for FY 2024-25 (AY 2025-26) is
September 15, 2025. If you are a salaried taxpayer, one of the most common dilemmas is deciding whether to opt for the
old tax regime or the
new tax regime. The right choice can
significantly impact your tax liability, depending on your salary, deductions, and exemptions.Here’s a step-by-step guide to help you make an informed decision.
1. Old vs New Tax Regime: Which Is Better?
For salaried individuals earning
up to Rs 15 lakh per year, the decision is crucial:
Old Tax Regime: Offers
higher tax rates but allows a wide range of
deductions and exemptions, such as HRA, LTA, insurance premiums, and 80C investments. Beneficial for those with deductions exceeding Rs 4.58 lakh.
New Tax Regime: Lower tax rates but
minimal exemptions. Suited for individuals with
fewer deductions or a simpler income structure.
2. Section 87A Rebate: Recent ITAT Clarification
A recent ruling by the
Income Tax Appellate Tribunal (ITAT) provides relief:Taxpayers earning
less than Rs 7 lakh annually can claim a
rebate under Section 87A, applicable to both
long-term capital gains (LTCG) and
short-term capital gains (STCG).Earlier, the rebate was considered applicable only on
STCG, creating confusion.This can reduce tax liability by up to
Rs 25,000 under the new regime for lower-income taxpayers.
3. How to Decide the Right Tax Regime
The easiest method is to use an
online income tax calculator:Enter your
salary, deductions, and exemptions.Compare tax liabilities under
both regimes.Check if your
income falls under the Section 87A rebate limit.
Quick tips based on income and deductions:| Annual Salary | When Old Regime Works Better |
| Rs 8 lakh | Deductions > Rs 2.5 lakh |
| Rs 9 lakh | Deductions > Rs 3 lakh |
| Rs 10 lakh | Deductions > Rs 3.5 lakh |
| Rs 12 lakh | Deductions > Rs 4.18 lakh |
| Rs 15 lakh | Deductions > Rs 4.58 lakh |
For
salaries above Rs 15 lakh, using an online calculator is the most reliable way to choose.
4. ITR Forms You Should Use
Choosing the correct ITR form is equally important:
ITR-1 (Sahaj): For individuals with
salary as the primary income.
ITR-2 / ITR-3: For taxpayers with
multiple income sources, including business, capital gains, or property.Note: In the ITR forms, the
new tax regime is set as default, but you can switch to the old regime if it saves more tax.
5. Practical Considerations
If you have
substantial deductions, the old regime could save more money.If your salary structure is simple and you have
few exemptions, the new regime may be
easier and more cost-effective.Use a
tax calculator before filing to
avoid last-minute confusion.
6. Final Word
With the
September 15, 2025 deadline approaching, salaried taxpayers should:Evaluate their
income, deductions, and exemptions carefully.Compare tax liabilities under
old vs new regimes.Select the option that
maximizes savings and simplifies compliance.Making an
informed choice now can help you avoid unnecessary tax payments and ensure
maximum benefits from your salary.