Introduction
The Finance Act, 2023 introduced pivotal amendments to Section 115BAC of the Income Tax Act, 1961, effective from Assessment Year (AY) 2024–25. As a result of these changes, the new tax regime has been made the default taxation system for certain categories of taxpayers, including Individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs) (excluding co-operative societies), Bodies of Individuals (BOIs), and Artificial Juridical Persons.
While both regimes offer distinct tax slab structures and benefits, the choice between them depends on the taxpayer’s specific financial profile, income composition, and available deductions.
Key Differences Between the Old and New Tax Regimes
| Particulars | Old Tax Regime | New Tax Regime |
|---|---|---|
| Eligibility | For taxpayers without business income: The old regime can be opted for each financial year while filing the Income Tax Return (ITR) on or before the due date prescribed under Section 139(1). | For taxpayers with income from business or profession: To opt out of the new tax regime, Form 10-IEA must be filed within the due date under Section 139(1). Any future re-entry into the new regime also requires filing Form 10-IEA. |
| House Rent Allowance (HRA) | Exemption under Section 10(13A) is available to salaried individuals. | Exemption is not available. |
| Standard Deduction | ₹50,000 or the amount of salary, whichever is lower. | ₹75,000 or the amount of salary, whichever is lower. |
| Deductions under Chapter VI-A | Deductions under Sections 80C, 80CCC, 80CCD, 80D, 80E, 80G, 80TTA, and 80TTB are permitted. | Deductions are largely disallowed, except those under Sections 80CCD(2), 80CCH, and 80JJAA. |
| Interest on Borrowed Capital (Self-occupied Property) | Deduction up to ₹2,00,000 available under “Income from House Property.” | Deduction not allowed as per Section 115BAC. |
| Basic Exemption Limit (Senior Citizens) | ₹3,00,000 for senior citizens and ₹5,00,000 for super senior citizens. | Uniform basic exemption limit of ₹3,00,000 for all individuals, irrespective of age. In addition, no tax is payable up to total income of ₹12,00,000. |
| Basic Exemption Limit (Individuals below 60 years) | ₹2,50,000 for individuals below 60 years. | Uniform exemption limit of ₹3,00,000 across all age groups. No income tax is payable up to ₹12,00,000 of total income. |
Which Regime Should One Choose?
There is no one-size-fits-all answer to this question. The choice between the old and new tax regimes is subjective and should be based on a thorough comparative analysis of the tax liability under each system. Taxpayers are advised to use the Income and Tax Calculator available on the official Income Tax Portal to estimate their potential tax liability under both regimes and select the more beneficial option accordingly.
Conclusion
The amendments to Section 115BAC reflect the government’s intent to simplify the tax structure and promote voluntary compliance. However, taxpayers must undertake an informed evaluation based on their financial situation, available deductions, and tax-saving preferences.
Disclaimer
The content provided herein is intended solely for informational and explanatory purposes. It does not constitute financial advice or solicitation. The information is based on publicly available sources and is subject to change without notice. Readers are strongly advised to consult a qualified tax professional or financial advisor before making any tax-related decisions.
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