The season for filing Income Tax Returns (ITR) has begun. Many taxpayers have also filed their ITRs. After getting Form 16, salaried taxpayers have also started filing returns. Earlier this week, I met Neha Jain.
A few years ago, we both used to work in the same company. Seeing her upset, I asked if she had any problem. At first, she said no, but after a while she said that she wanted to ask something. I said that she can ask without hesitation.
Jain said that her employer has issued her digital Form 16. She wants to file income tax return but she does not know which regime will be best for her? The second question was that at the beginning of the last financial year, she had told her employer that she wanted to use the old regime. The question is, can she change it now?
First I told Jain to come out of his worry. Actually, this problem is not only of Jain. There are lakhs of salaried taxpayers who are confused about this question. The reason for this is the old and new regime of income tax. This system was implemented about 5 years ago. Now taxpayers have the option to choose any one of the new and old regimes as per their wish. In the old regime, one gets the benefit of deductions. Especially, one gets the benefit of deduction on section 80C, 80D and home loan principal and interest. These benefits are not available in the new regime.
Jain has been using the old income tax regime since the beginning. Actually, she has taken term insurance. She has bought a health policy. She also makes tax saving investments every year under section 80C. These include tax saving schemes of mutual funds and PPF. Now someone has told her that despite getting deduction on tax saving investments, if she uses the new income tax regime, she will have to pay less tax. That is why she is confused.
If Neha feels that she will have to pay less tax by using the new regime to file income tax return for the financial year 2024-25, then she can use the new regime. It is important to understand that even if you have told your employer about using the old regime at the beginning of the previous financial year, you can still use the new regime instead of the old one at the time of filing income tax return. Yes, it is true that your employer will deduct your TDS as per the old regime. But, if your tax is less by using the new regime, then the TDS deducted will be refunded to you in the form of a refund.
Tax experts say that if salaried taxpayers do not have income from business, that is, they only have income from salary, bank interest etc., then they can change their income tax regime every year. There is no limit on how many times he can make changes. This means that if you do a job and at the beginning of the last financial year i.e. April 2024, you told your employer that you will use the old regime, then you still use the new regime at the time of filing ITR this year. Therefore, Jain has no need to worry. After I told her this, she looked satisfied.
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