New vs Old Tax Regime: Which One Should You Choose for ITR Filing 2025?

The new tax regime is the default from FY 2023-24 unless taxpayers opt for the old regime. Salaried individuals and those with non-business income can switch between the two every year before the ITR filing deadline, while business and professional taxpayers face restrictions and can return to the old regime only once. To opt for the old tax regime, Form 10-IEA must be submitted before filing. The deadline for ITR filing for non-audit taxpayers is July 31, 2025, with belated returns allowed until December 31, 2025, subject to a late fee.

If the original return was filed on time, taxpayers can revise it to change their tax regime. The old tax regime permits deductions under Section 80C (PPF, EPF, Life Insurance), 80D (Medical Insurance), and HRA, while the new tax regime offers lower tax rates but excludes most deductions. The old regime is beneficial for those who claim multiple deductions, whereas the new regime simplifies taxation with reduced rates. Evaluating both options carefully before filing can help maximize tax savings.

New vs Old Tax Regime: Which One Should You Choose for ITR Filing 2025?

When it’s time to file your Income Tax Return (ITR) for 2025, you must decide whether to opt for the new or old tax regime. This decision affects how much tax you pay, so it’s important to understand the differences and choose wisely. The best option depends on your income sources and eligibility for deductions. Let’s break it down in simple terms to help you make the right choice.

Can You Switch Between Tax Regimes Every Year?

If your income comes from salary, interest, or rent (non-business income), you have the flexibility to switch between the old and new tax regimes each year. However, you must make this decision before the ITR filing deadline, which is July 31, 2025. If you miss this deadline and file your return late, you won’t be able to opt for the old regime—you’ll have to stick with the new one.

Rules for Business and Professional Taxpayers

For individuals earning income from a business or profession, the rules are stricter. If you choose the new tax regime, you cannot switch back and forth annually. You are allowed only one opportunity to return to the old regime, after which you must remain in the new regime. If you decide to revert to the old regime, you must submit Form 10-IEA before filing your ITR.

Important Deadlines for ITR Filing 2025

• Regular Filing Deadline: If you are not required to undergo a tax audit, the last date to file your ITR is July 31, 2025 (for the financial year 2024-25 and assessment year 2025-26).
• Belated Returns: If you miss the July 31 deadline, you can still file your return by December 31, 2025, but a late fee will apply.
• Revised Returns: If you have already filed your return on time but want to change your tax regime, you can submit a revised return.

Which Tax Regime is Better for You?

The choice between the old and new tax regimes depends on your income and the deductions you claim.

Old Tax Regime

• Higher Tax Rates: The old regime has higher tax rates than the new one.
• More Deductions: You can claim various deductions to reduce taxable income, including:
  • Section 80C: Investments in PPF, EPF, life insurance premiums, etc.
  • Section 80D: Premiums paid for medical insurance.
  • HRA (House Rent Allowance): If you live in rented accommodation, you can claim this exemption.

If you invest in tax-saving instruments or have significant expenses like medical insurance or rent, the old regime may offer greater savings.

New Tax Regime

• Lower Tax Rates: The new regime offers lower tax rates compared to the old one.
• Fewer Deductions: Most deductions available under the old regime are not allowed under the new one. This means your taxable income may be higher, but the lower tax rates could still work in your favor.

If you prefer a simpler tax structure with fewer deductions to manage, the new regime might be a better fit. It is particularly beneficial for those with minimal tax-saving investments or deductible expenses.

How to Decide?

To make the right choice, consider the following:

1. Calculate Your Tax Liability: Use online tax calculators or consult a tax professional to estimate your tax under both regimes.
2. Check Your Deductions: If you claim multiple deductions under the old regime, compare the total tax savings with the new regime’s lower rates.
3. Evaluate Your Financial Goals: If you prefer simplicity and want to avoid tracking deductions, the new regime may be more convenient.

Final Thoughts

Choosing between the old and new tax regimes is an important financial decision. Take the time to evaluate your income, deductions, and financial goals before filing your ITR. If you’re unsure, consult a tax advisor for personalized guidance. Remember, the deadline to make this choice is July 31, 2025, so plan ahead to avoid last-minute stress!