Old Tax Regime

The old tax regime utilizes a set of old tax regime slabs with corresponding tax rates. It offers the ability to claim various deductions and exemptions under sections like 80C, 80D, and HRA. The old regime offers higher basic exemption limits for different age groups, reducing the taxable income at the outset. If you have significant investments or expenses eligible for deductions, the old regime might offer lower tax liability compared to the new tax regime.

Features of Old Tax Regime

The old tax regime offers a different set of benefits compared to the tax slabs of new tax regime introduced in 2020. With various deductions and exemptions that can potentially reduce your taxes, the old tax regime can be more suitable for individuals with significant investments, high medical expenses, or home loan interest payments.

The other features of the old tax regime include:

• Higher Tax Slabs: The old regime has five tax slabs with rates ranging from 0% to 30%. These rates can be beneficial for higher income earners who might end up paying less tax compared to the new regime with its lower slabs.
• More Deductions and Exemptions: You can claim deductions and exemptions under various sections of the Income Tax Act to reduce your taxable income. Some popular deductions include:
  • Section 80C: This allows deductions for investments up to Rs. 1.5 lakh in various tax-saving schemes like PPF, ELSS mutual funds, tuition fees, etc.
  • House Rent Allowance (HRA): Salaried individuals can claim deductions for rent paid.
  • Leave Travel Allowance (LTA): This allows tax benefits on travel expenses for yourself and your family.
  • Standard Deduction: An additional deduction of Rs. 50,000 is available for salaried individuals.
  • Interest on Home Loan: Deductions are available for interest paid on home loans for self-occupied or vacant properties.
  • There are many other deductions and exemptions available under various sections like medical expenses, donations, etc.
• Flexibility: The old regime offers more flexibility in tax planning. You can choose investments and expenses that align with your financial goals while maximizing tax benefits.

Old Regime Tax Slabs

The old regime comes with various tax deductions and exemptions, while the new regime has lower tax rates but offers fewer deductions. The table below presents the tax slabs under the old regime for the financial year 2023-24 (Assessment Year 2024-25).

Age-Wise Income Tax Slab for Old Tax Regime

The Indian income tax system employs a progressive tax structure with different rates applied to various income brackets. These tax slabs are further categorized based on the taxpayer’s age, recognizing the varying financial circumstances of different age groups.

The table below shows the income tax slabs of the old regime for individuals below 60 years and for Hindu Undivided Family.

The table below shows the income tax slabs of the old regime for individuals above 60 years and below 80 years.

The table below shows the income tax slabs of the old regime for individuals above 80 years.

Tax Rebate Under Section 87A

Section 87A of the Income Tax Act, of 1961 provides a tax rebate for resident individual taxpayers in India. It essentially reduces your income tax liability, making it a valuable benefit. The rebate is applied to your taxable income, which is your gross total income minus deductions (sections like 80C, 80D, etc.).

There are two rebate limits depending on the tax regime you choose:

• Old Regime: Maximum rebate of Rs. 12,500 for taxable income up to Rs. 5,00,000 (FY 2024-25, AY 2025-26).
• New Regime: Maximum rebate of Rs. 25,000 for taxable income up to Rs. 7,00,000 (FY 2024-25, AY 2025-26).

Who Can Claim It

• Only resident individual taxpayers are eligible.
• Non-resident individuals and companies cannot claim this rebate.

How to Claim It?

• While filing your income tax return (ITR), you’ll need to choose the tax regime (old or new) and indicate if you’re claiming the rebate under Section 87A.
• Make sure your taxable income falls under the specified limits for the chosen regime.

Steps to Choose Old Tax Regime During ITR Filing

The option to choose the Old Regime happens during the tax filing process for a particular financial year. There are two scenarios depending on the type of Income Tax Return (ITR) form you need to file. You can effectively choose the old tax regime during your ITR filing process with the swallowing steps.

ITR-1 or ITR-2

Follow the steps below if you are a salaried individual with income below specific limits.

• Step 1: Gather your income documents.
• Step 2: Choose your filing method (online or e-filing portal).
• Step 3: Fill out the ITR form. During the filing process, look for a section related to tax regime selection. The wording might be “Do you wish to exercise the option u/s 115BAC(6) of opting out of the new tax regime?” (or similar).
• Step 4: Select “Yes” for the Old Tax Regime if you want to opt out of the new regime.
• Step 5: Complete the ITR filing process.

ITR-3, ITR-4, or ITR-5

Follow the steps below if you own a business with income exceeding Rs. 5 lakh or foreign income.

• Step 1: Gather your income documents.
• Step 2: Choose your filing method.
• Step 3: File Form 10-IEA electronically if your income falls under scenarios requiring it (business income exceeding Rs. 5 lakh or foreign income).
• Step 4: Fill out the ITR form (ITR-3, ITR-4, or ITR-5). The option to choose the tax regime might not be visible since you already opted out via Form 10-IEA.
• Step 5: Complete the ITR filing process.

Tax Rates of Old Tax Regime Vs New Tax Regime

The right choice while choosing a tax regime, it’s better to consider your scenarios. If your income falls within the lower tax slabs and you don’t have many deductions, the new regime would be suitable. If you utilize many deductions (like Section 80C investments), the old regime can be advantageous.

The table below presents the Tax slabs for the old tax regime and new tax regime.