ITR Filing: Why New Income Tax Regime May Make More Sense For You

The new financial year has begun and taxpayers are gearing up to file the income tax return for the previous financial year.

The deadline to file the ITR for FY 2024-25 for the individual taxpayers who don’t need their accounts to be audited is July 31, 2025. However, it's advisable to file the ITR for FY 2024-25 to avoid last-minute rush and any error in reporting details.

It's important for the taxpayers to choose the suitable tax regime from the old and new tax regimes, as per their earnings and total tax liability. The new tax regime is the default regime for ITR filing for FY 2024-25, or Assessment Year 2025-26. However, the taxpayers can opt for the old tax regime.

While both tax regimes have their pros and cons, the new tax regime is now more attractive and a better option for many individuals. The selection between the two depends on the taxpayers’ total tax liability and the deductions they want to claim.

It's important to understand the tax slabs and benefits of choosing between the old and new tax regimes.

The old tax regime offers several deductions and exemptions under various sections of the Income Tax Act, 1961. On the other hand, the new tax regime offers liberal tax slabs but limited exemptions.

New Tax Regime: Tax Slabs For FY 2024-25 

• Up to Rs 3,00,000: Nil.

• Rs 3,00,001–7,00,000: 5%.

• Rs 7,00,001–10,00,000: 10%.

• Rs 10,00,001–12,00,000: 15%.

• Rs 12,00,001–15,00,000: 20%.

• More than Rs 15,00,000: 30%.

Old Tax Regime: Tax Slabs For FY 2024-25 

• Up to Rs 2,50,000: 0%.

• Rs 2,50,001–5,00,000: 5%.

• Rs 5,00,001–Rs 10,00,000: 20%.

• Rs 10,000,01 and above: 30%.

• Higher Tax Rebate Limit: A full tax rebate is provided on incomes up to Rs 7 lakh, which was Rs 5 lakh under the old tax regime. This means that taxpayers with incomes of up to Rs 7 lakh in a financial year will not be required to pay any tax under the new regime.

• Higher Standard Deduction: The new tax regime includes a higher standard deduction as compared to the older one. The standard deduction under the old regime is Rs 50,000, while it is Rs 75,000 under the new tax regime for salaried employees. This additional deduction helps to reduce the total tax liability for the salaried class.

• Family pension: Those who are eligible for a family pension can claim a deduction of Rs 25,000 for the FY 2024-25.

• Streamlined tax slabs: The new tax slabs are simpler as there is no tax on income up to Rs 3 lakh. From Rs 3 lakh to Rs 7 lakh, a 5% tax applies, while 10% applies to the income between Rs 7 lakh and Rs 10 lakh, and income from Rs 10 lakh to Rs 12 lakh attracts 15%. If your income is between Rs 12 lakh and Rs 15 lakh, the rate is 20%; if your income exceeds Rs 15 lakh, the rate is 30%.

• Deductions: While only limited deductions are allowed under the new tax regime, a few tax-saving options are still available. Various deductions can also be claimed under Sections 80CCD (2), 80CCH, and 80JJAA under the new tax regime.

If you don't have many tax-saving investments, opting for the new tax regime could be a suitable option. The lower tax rates and liberal tax slabs under the new regime could bring down your overall tax liability. However, if you actively invest in tax-saving instruments or receive housing-related perks, the old regime could be a better option.