Compare the Old and New Regimes and choose which is optimal for you!

Income Tax
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When it comes to taxes, it’s essential to understand how they can impact your finances and help you make informed decisions. So, the question remains: which regime is optimal for you?

In the old tax regime, you pay tax after considering deductions such as section 80C, for investments like mutual funds, EPF, PPF, and more. Additionally, section 80D for medical insurance, while salaried individuals can benefit from standard deductions and HRA. Essentially, the old regime allows you to reduce your tax liability by considering these deductions.

Whereas, the new regime offers a simplified tax structure with reduced tax slabs and you pay tax without any deductions.

Tax Rates: Old Regime & New Regime for AY 2023-24

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Now that we have understood the differences, and try to understand the taxability under both regimes.

Let’s say you’re an individual below 60 years with a gross total income of ₹11 lakhs. Your income comprises ₹8 lakhs from salary and ₹3 lakhs from other sources, which includes interest income of ₹2 lakhs from fixed deposits (FD) and ₹1 lakh from savings accounts.

In addition, you are eligible for a deduction under section 80C of ₹1,50,000 as you have invested the amount in PPF. You are also eligible for a deduction under section 80TTA of ₹10,000 for the interest earned on your savings account.

Solution:

Particulars Old Tax Regime New Tax Regime
Salary ₹8,00,000 ₹8,00,000
Less: Standard Deduction ₹50,000 Nil
₹7,50,000 ₹8,00,000
IFOS ₹3,00,000 ₹3,00,000
Total Income (A) ₹10,50,000 ₹11,00,000
Less: Chapter VI-A Deductions
Under section 80C ₹1,50,000 Nil
Under section 80TTA ₹10,000 Nil
Total Deduction (B) ₹1,60,000 Nil
Taxable Income (A-B) ₹8,90,000 ₹11,00,000
Net tax liability ₹12,500+78,000 ₹12,500+25,000+37,500+20,000
Total ₹90,500 ₹95,000
Add: 4% Cess ₹3,620 ₹3,800
Tax Payable ₹94,120 ₹98,800

It is recommended to calculate your taxes under both regimes to determine the most optimal one for your situation.

Note: If you have business income, you cannot switch between the two regimes every year.

1 Like
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In FY 2020-2021, I had filed returns under the new tax regime (after filing form 10IE), in FY 2021-2022, I filed under the old tax regime (again after filing form 10IE).

Now when I try to file for FY22-23 under new tax regime, I select the option of opting into new tax regime. However the interface by default selects no on ‘Have you ever opted out of new tax regime’ and there is no way to rectify it.

Kindly help how to counter this issue

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Hi @Tejasvi_Singh

This is because if you have business or profession income, you have the option to switch regimes once in a lifetime.

You can switch the regime if you have no business income.

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I did not have business income in FY 20-21

I have professional income from FY 21-22 and FY 22-23
I have already filed form 10-IE for this year on the income tax website
What should I do now?

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Hi @Tejasvi_Singh

As per the law, an individual can change the regime only once in a lifetime if he files ITR 3, ie, with income from business & profession.

Even if you have filed form 10IE, the return will be processed as per the old tax regime only.

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Thanks for your prompt reply, will file as per old tax regime

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Hi @Tejasvi_Singh

Hope it was clarified!

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In FY 2022-23 I have done some small intraday trade with minimal profit of 100 rupees in zerodha. This is considered as business income and I am force to file ITR 3 this year. I have done a comparisons and found that the new tax regime is beneficial for me this year as I am not eligible for deductions. I now need to file FORM 10IE to select new regime. As this option once exercised and used again to come back to old tax regime will be permanent for life-time I am concerned with proceeding.

Lets say I file ITR 3 with new regime by filling FORM 10IE this FY and can file ITR 1 next FY. Will I be force to opt for the new tax regime or will this be optional for ITR 1 irrespective of what has been submitted in FORM 10IE?

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Hi @sai_sankalp_reddy_tv

Yes, you can file ITR 1 in the next FY by again filing form 10IE if you want to opt out of the new regime.
If you wish to continue in the new regime you can do that as well.