The Old Tax Regime: 4 Advantages That Might Make It the Smarter Choice

Old Tax Regime

The Old Tax Regime: 4 Advantages That Might Make It the Smarter Choice

Old Tax Regime

As the financial year 2024–25 wraps up, taxpayers are gearing up for the income tax filing season. With the deadline to file Income Tax Returns (ITR) set for July 31, individuals now have ample time to evaluate their options — including which tax regime to opt for.

Since the introduction of the new tax regime, taxpayers have had the choice between two frameworks:

  • The old tax regime, which allows deductions and exemptions.

  • The new tax regime, which offers lower tax slabs but limits deductions.

While the new regime might appear attractive at first glance due to the lower tax rates, it’s not always the most financially rewarding choice — especially if you qualify for various exemptions. Here’s a look at four compelling reasons why the old tax regime might be the better option for you.

You Have Significant Tax-Saving Investments

The old tax regime supports a wide array of deductions under various sections, including:

  • Section 80C: Investments in PPF, ELSS, LIC premiums, tuition fees, home loan principal repayment, etc.

  • Section 80D: Premiums paid for health insurance.

  • Section 80G: Donations to eligible charities.

  • Section 80DD: Expenditure on treatment of dependent with disability.

If you’ve strategically invested in instruments that fall under these sections, sticking with the old regime can significantly reduce your taxable income.

On the flip side, the new tax regime offers very limited deductions, with only a few specific ones like:

  • 80CCD(2): Employer contribution to NPS.

  • 80CCH: Agniveer Corpus Fund.

  • 80JJAA: For new employment.

You Receive House Rent Allowance (HRA)

Salaried individuals living in rented accommodation can claim HRA exemption under Section 10(13A) in the old regime. This can be a substantial deduction based on your salary, rent paid, and city of residence.

HRA exemption is not allowed under the new regime, which can make a significant difference to your final tax outgo, especially if you’re working in metro cities with high rental costs.

You Fall in the Highest Tax Bracket

Taxpayers with annual income exceeding ₹10 lakh are taxed at 30% under the old regime, whereas under the new regime, the 30% slab applies only after ₹15 lakh.

At first glance, this appears favorable — but here’s the catch:
Without deductions, the new regime offers no real relief to those in the highest tax bracket who already enjoy considerable exemptions under the old regime.

For such taxpayers, the old regime often results in lower overall tax liability, especially when factoring in deductions for housing loans, children’s education, and insurance premiums.

The Numbers Speak for Themselves

Finally, if you’re still unsure — let the data guide you. Use a reliable income tax calculator that compares both regimes based on your income, exemptions, and deductions.

Often, the old regime emerges as the winner for those who actively plan their taxes through eligible investments and expenses.

Read More: Discard Income Tax Return: Causes, Consequences, and Recovery Options

Conclusion

While the new tax regime promises simplicity and lower tax rates, it doesn’t necessarily result in savings for everyone. The old tax regime continues to be a smarter choice for those who:

  • Invest in eligible tax-saving instruments,

  • Claim HRA,

  • Fall in the highest income bracket, or

  • Have multiple deductions at their disposal.

Before filing your ITR this year, take a few minutes to run both scenarios through a calculator — because in taxation, one size definitely doesn’t fit all.

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        Discard Income Tax Return: Causes, Consequences, and Recovery Options

        Discard

        Discard Income Tax Return: Causes, Consequences, and Recovery Options

        Discard

        The Income Tax Department of India has recently introduced a much-needed feature for taxpayers — the “Discard Income Tax Return” option. This new tool allows individuals to delete their unverified Income Tax Returns (ITRs), making corrections and re-filing significantly simpler.

        Previously, even the smallest mistake in an unverified ITR meant either living with the error or going through the entire process of verifying it and then filing a Revised Return. This was both time-consuming and confusing. The new discard return option changes the game entirely.

        What Is the “Discard Return” Option in ITR?

        The discard return feature allows taxpayers to completely delete an unverified ITR from the Income Tax Department’s system. This means if you’ve filed your ITR but haven’t e-verified it yet, you can now discard it and file a fresh return — no revised return needed.

        This tool provides flexibility and eliminates unnecessary steps in the return correction process.

        Discard

        Purpose of the Discard Return Option

        Simplifying ITR Corrections

        The primary goal of this option is to make it easier for taxpayers to correct any mistakes in their original filings without jumping through hoops. As long as your ITR is unverified, you can discard it and start afresh.

        Minimizing Use of Revised Returns

        Previously, the only option to fix an error was to file a Revised Return after verifying the original one. This was inefficient for small mistakes. The discard option removes that burden, offering a faster, cleaner alternative.

        How to Use the Discard Return Option

        Here’s a step-by-step guide to discarding your ITR on the Income Tax e-filing portal:

        1. Visit incometax.gov.in

        2. Log in with your valid credentials.

        3. Navigate to the e-File section.

        4. Click on Income Tax Return.

        5. Go to e-Verify Return.

        6. If your ITR is still unverified, you will see the “Discard Return” option.

        7. Click on it and confirm by selecting “Yes”.

        Once confirmed, your ITR will be permanently deleted from the portal, and you can file a new one.

        Key Benefits of the Discard Return Feature

        Effortless Error Correction

        Mistakes happen. Whether it’s a typo or an incorrect tax calculation, this option lets you start over without hassle.

        Time-Saving Alternative to Revised Return

        Skip the whole process of verifying and revising. Simply discard and re-file — it’s faster, smoother, and more intuitive.

        Ensures Accuracy and Peace of Mind

        You can use the discard feature multiple times until your ITR is error-free and ready for final submission.

        Fix Tax Computation Errors

        Miscalculated your tax? Made an input error? This feature helps correct those issues without going through tedious rectification procedures.

        Discard Return vs Revised Return: What’s the Difference?

        FeatureDiscard ReturnRevised Return
        When You Can Use ItBefore e-verificationAfter ITR has been verified
        What It DoesPermanently deletes the ITRAllows changes to a verified ITR
        FlexibilityCan be used multiple times before verifyingLimited usage; must follow specific rules
        Time and EffortQuick and easySlightly longer and more formal process

        Bottom Line: Discard is for unverified ITRs. Revised is for already verified ones.

        Read More: Compliance Alert: TDS and TCS Rates for FY 2025-26

        The Discard Income Tax Return option is a welcome addition to the ITR filing process. It makes life easier for taxpayers by offering a convenient way to fix errors and start over — without the stress of filing a revised return.

        If your ITR is still unverified and you spot an error, don’t panic. Simply discard it and re-file a fresh, accurate return.

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              Compliance Alert: TDS and TCS Rates for FY 2025-26

              TDS

              Compliance Alert: TDS and TCS Rates for FY 2025-26

              TDS

              Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) continue to serve as essential mechanisms for ensuring tax compliance and revenue collection at the transaction stage. With the commencement of Financial Year 2025-26, understanding the updated TDS and TCS rates is critical for individuals, businesses, and foreign entities to ensure timely and accurate tax planning.

              TDS Rates for Residents – FY 2025-26

              TDS is deducted based on the nature of payment, applicable threshold, and the recipient’s status. Here are key sections to note:

              1. Salary & Provident Fund

              • Section 192: Salary – Tax deducted as per income slab rates.

              • Section 192A: Withdrawal from EPF (above ₹50,000) – 10%.

              2. Interest Income

              • Section 194A:

                • ₹50,000 for non-senior citizens – 10%.

                • ₹1,00,000 for senior citizens – 10%.

              3. Dividends and Securities

              • Sections 193 & 194: Dividend/Interest from securities – 10% (above ₹10,000).

              4. Winnings and Lotteries

              • Section 194B: Lottery/crossword winnings (above ₹10,000) – 30%.

              • Section 194BA: Online game winnings – 30%.

              • Section 194BB: Horse race winnings (above ₹10,000) – 30%.

              5. Contractor & Professional Payments

              • Section 194C:

                • Individual/HUF contractors – 1%.

                • Others – 2%.

              • Section 194J:

                • Professional fees – 10%.

                • Technical services/call centers – 2%.

              6. Rental Income

              Section 194I:

              • Rent on plant/machinery – 2%.

              • Other rents – 10%.

              7. Other Key Sections

              • Section 194Q: Purchase of goods exceeding ₹50 lakh – 0.1%.

              • Section 194R: Business perquisites – 10%.

              • Section 194S: Virtual Digital Asset transactions – 1%.

              • Section 194T: (New from April 1, 2025) – Payments to partners – 10%.

              • Section 194N: Cash withdrawals – 2% to 5% (based on return filing status).

              TDS Rates for Non-Residents – FY 2025-26

              Non-resident individuals and entities are subject to higher and fixed TDS rates across various payment categories:

              1. Salary & Winnings

              • Section 192: Salary – As per slab.

              • Sections 194B, 194BA, 194BB: Lottery/game/horse race winnings – 30%.

              2. Investment Income

              Section 195:

              • Capital gains – 12.5% or 20%.

              • Dividend – 10% or 20%.

              • Interest on loans – 20%.

              • Royalty & Technical Fees – 20%.

              3. Infrastructure-related Interest

              • Section 194LB: Interest from infrastructure debt funds – 5%.

              • Section 194LC:

                • Foreign currency loans – 5%.

                • Listed bonds in IFSC – 4%.

                • Others – 9%.

              4. Other Key Provisions

              • Section 196D: Income from securities (FIIs) – 20%.

              • Section 194T: Partner’s remuneration/interest – 10%.

              TCS Rates – FY 2025-26

              TCS is applicable when the seller collects tax from the buyer at the point of sale for specific goods or services. Here’s a summary:

              1. Common Goods

              • Alcoholic liquor: 1%

              • Timber, tendu leaves: 2%–5%

              • Scrap: 1%

              • Coal, lignite, iron ore: 1%

              2. High-Value Transactions

              • Motor vehicles (above ₹10 lakh): 1%

              • Sale of goods exceeding ₹50 lakh (Sec 206C(1H)) – Not applicable where TDS already applies.

              3. Overseas Transactions (Section 206C(1G))

              • Foreign remittance (general): 20%

              • Education/medical remittance: 5%

              • Overseas tour package:

                • Up to ₹10 lakh – 5%

                • Above ₹10 lakh – 20%

              Key Updates for FY 2025-26

              • Introduction of Section 194T: 10% TDS on partner-related payments by the firm.

              • Revisions to Section 194N: Enhanced compliance based on prior ITR filings.

              • Clarifications under Section 195: Refined TDS rates based on income types for non-residents.

              Read More: Compliance Checklist for ESOPs Under Companies Act 2013

              Staying updated on the applicable TDS and TCS rates helps taxpayers—residents and non-residents alike—comply with statutory obligations and avoid interest or penalties. The above summary provides a practical reference to navigate tax withholding and collection for FY 2025-26.

              For personalized assistance on withholding tax obligations or cross-border transactions, consult a professional tax advisor or reach out to Certicom Group of Chartered Accountants.

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