With the tax season approaching, taxpayers must decide between the old and new income tax regimes when filing their Income Tax Return (ITR) for the financial year 2024-25. Here’s what you need to know: the new tax regime has now become the default option. This means that unless you actively choose the old tax regime, your taxes will automatically be calculated under the new system. But the good news is that you still have the option to choose, depending on your income type.
Can You Switch Between Tax Regimes?
Your ability to switch between the old and new tax regimes depends on how you earn. If you receive income from a salary, rent, or interest (non-business sources), you can switch between the two regimes every year. For instance, if you opted for the new regime last year, you can easily switch back to the old one this year as long as you make the decision before filing your ITR. Keep in mind, to opt for the old tax regime, your ITR must be filed on time.
What About Business and Professional Income?
For business owners and professionals, the situation is a little more complicated. Once you switch to the new tax regime, you can only return to the old regime once. After that, you’ll be locked into the new system for good. If you decide to stick with the old tax regime, you will need to submit Form 10-IEA before filing your ITR, as per Budget 2023.
Key Deadlines for ITR Filing 2025
- Regular ITR Filing Deadline: July 31, 2025 (for FY 2024-25, AY 2025-26)
- Belated Return Deadline: December 31, 2025 (subject to late fees)
Which Tax Regime Saves You More?
Before deciding, it’s important to know the key differences between the two tax regimes:
- Old Tax Regime: Offers more deductions but comes with higher tax rates on lower income levels. Some of the main deductions include:
- Section 80C (for PPF, EPF, Life Insurance, etc.)
- Section 80D (for Medical Insurance)
- House Rent Allowance (HRA)
- New Tax Regime: Features lower tax rates but offers fewer deductions.
