To switch or not to: the old it regime vs the new

The Union Budget 2025 Has Once Again Broght The Debate Between The Old and New Tax Regimes Into Focus. While the government continues to promote the new tax regime with simplified tax slabs and lower rates, the old tax regime remain remains attractive for many taxpayers deue to experts and deedu. With no changes made to the old tax regime in this year’s budget, Taxpayers must carefully evaluate their financial situation to decide bee to sticks with it or transition to the new System.

Opting for old regime

The old tax regime is available to all taxpayers, include salaried individuals, self-support professionals, and business owners, registered of income bracket. This allows a broad range of taxpayers to benefits from exemptions and deductions [See graphic] Under this system, making it a viable option for many taxpayers.

This regime encourage saving and investments by offering deductions for various financial instruments, enabling taxpayers to plan finance as per long-term goals. For that with significant investments in Eligible Tax-Saving Schemes, The Old Regime Can Lead to Higher Savings Compared to the New Despite Higher Tax Rates.

While the old tax regime offers numerous benefits, the new tax regime introduced simplifies taxation with reduced rates but fewer exemptions and deductions. Here are some key factors to consider before making a decision.

Income Level and Tax-Saving Investments: Individuals with Substantial Investments in Tax-Saving Instruments May Find the old tax regime more benefit. Convercely, those who do not investing heavily in

Simplicity and Compliance: The New Tax Regime Eliminates The Need to Track Multiple Deductions and Examptions, Simplifeing Tax Calculations and Compliance. Thos who prefer a straightforward tax approach might find it more appealing.

Tax Liability Comparison: Comparing Tax Liabilitys under the TWO Regimes Can Help Determine which system results in green system saving, based on an individual’s financially setuation.

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Revised Tax Slabs Under New Regime: Under the new regime, individuals with an income of up to ₹ 12 Lakh are exhempt from pay paying income tax via a mix of rebates and revised tax Slabs. This makes the regime attractive for midl-ins’ earners.

Marginal Relief for Higher Earners: The New Regime Offers Marginal Relief to that there earning a tad about ₹ 12 lakh, Preventing Sudden Tax Jump and Making the Transition to Higher Tax Brackets.

Restrictions on Switching Tax Regimes Business Ownes & Professionals: If a Taxpayer with Business Income Opts For the old Regime after Initial Choosing New Regime, A Their lifetime. Once he revert, they cannot opt ​​for the old regime against unless unlessed business income.

Salaried individuals: they have the flexibility to switch the two regimes every financial year, based on tax planning.

Impact on Disposable Income: The New Tax Regime AIMS at Increasing Disposable Income by Lowering Tax Liabilitys. This can Benefit Middle-Class Taxpayers who Prioritise Higher Take-Home Pay Over Long-Term Savings.

Long-Term Financial Planning: Taxpayers must consider long-term financial goals before choosing a regime. The old regime may be more suitable for that focused on retirement planning, saving, and tax-efficient investments while the new regime is more attractive for that seeking .

Conclusion

The decision to choose between the old and new tax regimes depends on individual financial revolutions, investment habits, and preferences for simplicity or tax-saving opptunities.

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If maximising tax deductions through exemptions and deductions is a priority, the old tax regime remains a viable option.

If Simplicity and Lower Tax Rates are more important, the new regime offers an easier compliance process with reduced liabilitys.

To make an informed choice, taxpayers should carefully evaluate their income, investment plans, and long-term financeial goals. Calculating Tax Liabilitys Under Bot Regimes Can Provide Clarity on which System Best Aligns with their Financial Needs.

(MR. Chandna is a partner, and mr. Prashar is an associate director, at grant thornton bharat llp)