New vs old Income Tax regime Change Rules: Taxpayers now have to select any one of the two options before filing ITR. For filing, whether they want to choose the old tax system or the new tax system, it depends on them. However, under the Income Tax rules, those who have salary income and do not have income from any business or profession, they can choose between the old and new tax system for themselves before filing ITR every year. Considering the annual salary, income and deductions, you should choose the right tax option for you. On the contrary, those who have income from business or profession, they should choose between old and new tax system carefully as they get only one chance to withdraw it.
ITR Filing: These five big benefits are there by filing ITR on time, saving money apart from relief from legal problems
Opportunity to select option from Form 10 IE before ITR
Sundar Rajan TK, partner, DVS Advisors LLP, told The Financial Express that one can opt for either the old or the new tax regime by filling a Form 10IE before filing the ITR. According to Dr Suresh Surana, Founder, RSM India, the facility of change in the old or subsequent years in the tax system selected to file ITR for one year under the provisions of the Income Tax Act will be available only once to those earning from business and profession, whereas those who have been selected for filing ITR from salary only once. There is income, they will be able to choose the options according to them every year.
Which tax system is better
The decision of which option is better for you in the old or new tax system depends on the deductions that are to be claimed. According to Rajan, in the new tax system, tax has to be paid at lower rates but then standard deduction of Rs 50,000, professional tax, HRA (house rent allowance), leave travel concession, interest on home loan, LIC premium, money deposited in PF account The benefit of exemptions and deductions is not available on interest earned on savings account deposits, etc.
For example, suppose your annual income is Rs 10 lakh and you are eligible for deductions up to Rs 1.5 lakh (on LIC premium, PF account balance, interest earned on savings account deposits) in addition to standard deduction of Rs 50,000. If you claim, the total tax liability including cess from the old tax system will be Rs 75,400, while in the new tax system, you will have to pay a tax of Rs 78,000 including cess. If there is a deduction of less than Rs 187500 including standard deduction of Rs 50,000, then the new tax system is better.
(Article: Rajeev Kumar)