New Tax Regime Vs Old Tax Regime: Which is the Best for Salaried Employees?

When doing the new tax regime vs old tax regime comparison, many salaried employees find themselves weighing the benefits and drawbacks of each system. The decision between the two often hinges on various factors such as tax savings, simplicity of compliance, and individual financial goals.

This blog will help you compare old vs new tax regimes as it details slab rates, deductions, and factors to consider while selecting to simplify the tax filing process as a salaried employee.

Comparison of Slab Rates of New Tax Regime vs. Old Tax Regime

Utilising Deduction for Tax Saving

The old tax regime allows for various deductions and exemptions, such as those under Section 80C, housing loan interest under Section 24, and others. The new tax regime offers lower tax rates but with limited deductions and exemptions. A standard deduction on salary Income is allowed up to ₹50,000 under both the new and old tax Regimes.

Things to Remember While Switching Between Old and New Tax Regime

1. Calculate Tax Liability

While comparing, calculate income tax under both regimes. This will help you identify which regime offers you a lower tax outgo based on your income, deductions, and exemptions.

2. Consider Investment Plan

If you have made investments or financial commitments based on the deductions available in the old regime (like insurance premiums, PPF, home loans, etc.), consider how switching to the new regime, which offers limited deductions, will affect your tax-saving strategies. Remember, all deductions under Chapter VI A can be availed only under the old regime.

3. Flexibility to Choose

Though the New tax regime is the default, you have the flexibility to choose between the two regimes every financial year. This allows you to switch based on changes in your income, investments, and tax-saving investment plans.

4. Seek Professional Advice

If you are unsure about which regime to choose, consider seeking advice from a tax professional. They can provide personalised advice based on your financial situation.

5. Document and Records

Under the old regime, maintaining detailed records and documents for all deductions and exemptions claimed is crucial.

How to Opt for a New Tax Regime?

• Acknowledgement to Employer: If you are going to file tax as per the new regime, you have to inform the employer during the financial year so they can calculate TDS as per the new regime tax slabs.
• Submit Form 10IE: Before filing your Income Tax Return (ITR), if you have income from a business or profession, you must submit Form 10IE. This form is a declaration to the Income Tax Department of your choice to opt for the new tax regime.
• Filing Time: Form 10IE must be filed before submitting your ITR. Ensure this is done by the due date for filing ITR, typically 31st July unless the government announces an extension.
• Acknowledgement Number: Upon submitting Form 10IE, a 15-digit acknowledgement number will be generated. This number is crucial and must be mentioned when filing your ITR under the new tax regime.

Also Know About - How to File ITR Online

To Encapsulate

Understanding the difference between the new tax regime and old tax regime and the implication of each regime is crucial for making an informed choice that aligns with one's financial situation and objectives.

Considering the Old tax regime is best while making tax saving investments such as life insurance policies. At PNB MetLife, we provide a lot of tax saving options that one can avail deduction from to reduce the net taxable income.

Also Read:

Types Of Taxes In India

Can I pay zero tax on my income?

TDS vs TCS: Understanding the Difference between TDS and TCS