ITR filing 2025: Before filing your income tax return, it is vital to compare the tax computation under both the tax regimes i.e., old and new. And you can opt for the regime which gives lower tax outgo.
Introduced in 2020, the new tax regime was made the default regime for taxpayers as per Finance Act, 2023 which expanded the scope of this regime to include AOP, BOI, and AJP.
If you opt for the new tax regime as per Section 115BAC, you are supposed to forgo exemptions and deductions while computing total income.
If you are availing of exemptions or deductions under the normal tax regime, you may end up paying more tax under the new tax regime if the amount of exemptions and deductions is substantial.
Therefore, if the amount of deductions under Section 80C, Section 80D, and the interest on housing loan under Section 24 is considerable, it would be advisable for the taxpayer to opt for the old tax regime over the new tax regime.
It is important to carry out calculation to assesss which regime turns out to be better than the other.
Step-by-step process
Let us understand how this happens.
First of all, you have to look for the tax tools on the income tax department’s website. This is the link on which you can find it. Now you can choose the slug on the extreme left hand side (check the image above) which mentions tax calculator: old versus new regime.
As you click this link, it will take you to the tax calculator – old regime vis-a-vis new regime.
Before you can start with the actual calculation – you are supposed to choose three things i.e., taxpayer — individual, age category and residential status whether you are resident or non resident.
Moving on, you have to enter your income across different categories i.e., salary, income other than salary and income from house property.
In the next column, you have to enter deductions/ exemptions given under the old or new tax regime.
Finally, the tax calculator will compute the income tax under both the regimes.
And thereby, you can find out which regime is giving a better deal in terms of lower income tax.
