What is the main difference between old and new tax regime?+
The main difference is that the old tax regime offers lower tax rates with numerous deductions and exemptions like 80C, HRA, and LTA, while the new tax regime provides reduced tax rates without most deductions and exemptions. The new regime has simpler tax slabs with lower rates but restricts your ability to claim traditional tax-saving investments and allowances.
Which tax regime is better for salaried employees in 2024?+
For salaried employees with annual income below ₹7.5 lakhs or above ₹15 lakhs, the new tax regime is generally more beneficial. However, if you have significant investments in PPF, ELSS, home loan, or claim HRA and LTA, the old tax regime may be better. The choice depends on your total deductions - if deductions exceed ₹2.5-3 lakhs, old regime typically works better.
Can I switch between old and new tax regime every year?+
Yes, salaried individuals and pensioners can switch between old and new tax regime every financial year. However, individuals with business income can switch only once in their lifetime. You need to declare your choice while filing ITR or inform your employer at the beginning of the financial year for TDS purposes.
What deductions are not allowed in the new tax regime?+
The new tax regime does not allow most common deductions including 80C (PPF, ELSS, life insurance), 80D (health insurance), HRA, LTA, standard deduction (for FY 2022-23 and earlier), home loan interest under section 24, and chapter VIA deductions. However, from FY 2023-24, standard deduction of ₹50,000 and employer NPS contribution are allowed in the new regime.
Is new tax regime mandatory for income above certain limit?+
No, the new tax regime is not mandatory for any income level. It is optional for all taxpayers. While the government has made the new regime as default from FY 2023-24, taxpayers can still opt for the old regime if it is more beneficial. You have the freedom to choose based on your tax-saving investments and deductions available to you.