Introduction
The Indian tax regime has experienced substantial changes in recent years, most notably with the implementation of the New Tax Regime in the Union Budget 2020. These changes have piqued the interest and perplexity of taxpayers, prompting them to wonder how many times they can move between the Old and New Tax Regimes.
Old Tax Regime in India
The Old Regime, also known as the existing regime, adheres to the traditional income tax slab system, with taxpayers able to take use of several deductions and exemptions. Individuals and Hindu Undivided Families (HUFs) can claim deductions under Sections 80C, 80D, 80G, and other provisions under this system, which can significantly lower their taxable income and overall tax liability.
New Tax Regime in India
The New Regime, which was established in the Union Budget 2020, lowers income tax rates while eliminating most deductions and exemptions. This simplified tax structure attempts to give taxpayers with an alternate tax computation approach, which may be advantageous for certain persons who do not regularly claim a large number of deductions or exemptions.
Read more: Guide to Form 10IE: Choosing the New Tax Regime in India
Tax Slabs Comparison (FY 2023-24)
For the financial year 2023-24, here is a comparison of the tax slabs for both the Old and New Regimes for individual taxpayers.
Old Tax Regime
| Slabs | Individuals (Below 60 years old) | Senior citizens (Above 60 but below 80 years old) | Senior citizens (Above 80 years old) |
| Up to Rs. 2.5 lakh | Nil | Nil | Nil |
| Rs. 2,50,001 to Rs. 3,00,000 | 5% | Nil | Nil |
| 3,00,001 to Rs. 5,00,000 | 5% | 5% | Nil |
| 5,00,001 to Rs. 10,00,000 | 20% | 20% | 20% |
| Above Rs. 10,00,000 | 30% | 30% | 30% |
New Tax Regime
| Slabs | Income Tax Rates |
| Upto Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 6,00,000 | 5% (Tax rebates u/s 87A) |
| Rs. 6,00,001 to Rs. 9,00,000 | 10% (Tax rebate u/s 87A upto Rs. 7 lacs) |
| Rs. 9,00,001 to Rs. 12,00,000 | 15% |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
Switching Between Old and New Tax Regimes
Taxpayers have the option under the Income Tax Act to choose between the Old and New Tax Regimes each fiscal year, based on their financial circumstances and tax-saving preferences. There is no limit to how many times a person can transition between the two regimes.
However, keep in mind that you can only alter regimes while completing your income tax return (ITR) for the appropriate fiscal year. Once you have filed your ITR for a given financial year, the chosen regime is locked in for that year and cannot be changed retroactively.
Factors to Consider When Switching Regimes
- Income Level
Individuals with large incomes and several deductions may find the Old Regime to be more advantageous due to the availability of deductions and exemptions.
- Long-term Perspective
When picking between the two regimes, keep your long-term financial goals and tax planning methods in mind.
Conclusion
Select the regime that best fits your financial condition and tax-saving needs. To make an informed decision based on your specific circumstances, it is best to speak with a tax consultant or financial specialist.
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