Switching New to the Old Income Tax Regime in FY 2024-25 (AY 2025-26) at the time of Filing of Return
Switching New to the Old Income Tax Regime in FY 2024-25 (AY 2025-26) at the time of Filing of return
Last updated: April 23, 2025
Introduction
India’s Income Tax Act now offers two parallel regimes: the New Tax Regime, introduced in FY 2020-21 with lower slab rates but minimal deductions, and the Old Tax Regime, retaining most Chapter VI-A exemptions. For taxpayers in FY 2024-25 (filing in AY 2025-26), choosing the right regime can save anywhere from tens of thousands to several lakhs of rupees.
- Historical & legislative background
- Detailed slab comparisons & deduction matrices
- Eligibility, lock-in rules & special categories
- Stepbystep ITR filing walkthrough
- Seven realworld case studies
- Advanced tax-planning strategies
- NRIs, freelancers, small businesses & pensioners
- Compliance tips, e-filing best practices & future outlook
- 20 exhaustive FAQs, pre-filing checklist & glossary
By the end of this guide, you’ll have complete clarity on which regime maximizes your savings and how to file seamlessly on the e-Filing portal.
Section 1: Historical & Legislative Background
Prior to Budget 2020, India operated under a single tax regime: slab rates up to 30%, generous exemptions like HRA, LTA, standard deduction, plus deductions under Chapter VI-A (80C, 80D, 80E, 80G, etc.). Tax planning revolved around these exemptions.
In February 2020, Section 115BAC was introduced, creating an optional New Tax Regime with six tax slabs (5%, 10%, 15%, 20%, 25%, 30%) but removing nearly all exemptions. The goal was simplification and a broader tax base.
Key amendments since then include:
- Retention of the ₹ 50,000 standard deduction for salaried taxpayers even in the new regime.
- Clarifications on the five-year lock-in for business income opting into the new regime.
- No changes to the old-regime deductions, which remain fully available.
As of FY 2024-25, both regimes co-exist, giving taxpayers the power to switch annually (for salaried/pensioners) or face lock-in rules (for business/professionals).
Section 2: Detailed Comparison of Old vs New Regimes
2.1 Slab Rates (FY 2024-25)
Old Regime
- Up to ₹ 2.5 lakhs: Nil
- ₹ 2.5–5.0 lakhs: 5%
- ₹ 5.0–10.0 lakhs: 20%
- Above ₹ 10.0 lakhs: 30%
New Regime
- Up to ₹ 3.0 lakhs: Nil
- ₹ 3.0–6.0 lakhs: 5%
- ₹ 6.0–9.0 lakhs: 10%
- ₹ 9.0–12.0 lakhs: 15%
- ₹ 12.0–15.0 lakhs: 20%
- Above ₹ 15.0 lakhs: 30%
2.2 Exemption & Deduction Matrix
| Benefit | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹ 50,000 | ₹ 50,000 |
| Section 80C | Up to ₹ 1.5 lakhs | ✗ |
| House Rent Allowance | ✓ (as per rules) | ✗ |
| HomeLoan Interest (24b) | Up to ₹ 2 lakhs | ✗ |
| Section 80D | Up to ₹ 1 lakh | ✗ |
| Section 80E | No cap | ✗ |
| Section 80G | As per fund rules | ✗ |
| Leave Travel Allowance | ✓ | ✗ |
| Other 80s (TTB, etc.) | ✓ | ✗ |
Key takeaway: The old regime offers extensive deductions that can drastically reduce taxable income, especially for those with high 80C investments, home loan interest, and HRA. The new regime provides simplicity at the expense of these benefits.
Section 3: Eligibility & Lock-In Rules
3.1 Salaried Individuals & Pensioners
You may choose either regime every financial year. There is no lock-in, and no Form 10-IE is required—just select your preferred regime when filing the ITR.
3.2 Business & Professional Income
If you have income under “Profits & Gains of Business or Profession,” filing Form 10-IE to opt into the new regime locks you in for five consecutive years. You can only revert to the old regime if business income ceases.
3.3 NRIs & Special Categories
Non-Resident Indians choose regimes on their Indian-sourced income only, following the same rules. Agricultural income remains outside regime choice. Charitable trusts and other entities have separate provisions.
Section 4: Step-by-Step ITR Filing Guide (AY 2025-26)
- Gather Documents: Form 16/16A, Form 26AS, 80C receipts, 80D bills, rent receipts, home loan interest certificate, CA certificates (if any).
- Login to e-Filing Portal: Go to incometax.gov.in and authenticate with Aadhaar OTP or login credentials.
- Select Assessment Year: 2025-26, corresponding to FY 2024-25.
- Choose ITR Form: ITR-1 for salary/pensioners, ITR-3 or ITR-4 for business professionals.
- Enter Income Details: Fill salary, house property details, capital gains, and other sources.
- Select Tax Regime: Under “Tax Regime,” pick “Old Tax Regime – Exemptions & Deductions.”
- Claim Deductions: Populate schedules for Chapter VI-A (80C, 80D, 80E, 80G), HRA, home loan interest, LTA, etc.
- Preview Tax Liability: Use the portal’s “Preview” to verify tax, cess, surcharge, and TDS credit.
- Submit & E-Verify: Submit the ITR and complete verification via Aadhaar OTP, Electronic Verification Code (EVC), or by mailing signed ITR-V to CPC, Bengaluru.
- Track Status: Monitor processing status and refund (if applicable) through the portal’s “View Returns / Forms” section.
Pro Tip: File at least one week before the due date to avoid last-minute portal slowdowns and ensure you can fix any errors.
Section 5: Seven Real-World Case Studies
5.1 High HRA Claim (Mumbai IT Professional)
Profile: 29-year-old software engineer, gross salary ₹ 14.5 lakhs, rent ₹ 1.2 lakhs/month, 80C investments ₹ 1.5 lakhs, 80D ₹ 25,000
- New Regime Tax: Approx. ₹ 1.62 lakhs
- Old Regime Tax: Approx. ₹ 58,500
- Savings: ₹ 1.03 lakhs
By claiming HRA, 80C, and 80D under the old regime, the engineer saved over ₹ 1 lakh compared to the simplified new slab.
5.2 Home Loan-Heavy Profile (Pune CA)
Profile: 38-year-old chartered accountant, gross salary ₹ 18 lakhs, home loan interest ₹ 2 lakhs, 80C ₹ 1.2 lakhs, standard deduction ₹ 50,000
- New Regime Tax: Approx. ₹ 2.25 lakhs
- Old Regime Tax: Approx. ₹ 30,000
- Savings: ₹ 1.95 lakhs
Heavy home-loan interest deduction under Section 24(b) makes the old regime dramatically more tax-efficient.
5.3 Minimal Deductions (Delhi Executive)
Profile: 25-year-old marketing executive, gross salary ₹ 6 lakhs, no major deductions aside from standard deduction ₹ 50,000
- New Regime Tax: ₹ 15,000
- Old Regime Tax: ₹ 15,000
- Result: No difference
For taxpayers with almost no exemptions, the new regime’s simplicity wins without any extra cost.
5.4 Freelancer with Mixed Income
Profile: 32-year-old graphic designer, professional fees ₹ 6 lakhs, capital gains ₹ 4 lakhs, 80C ₹ 1 lakh, 80D ₹ 15,000
- New Regime Tax: ₹ 85,000 (approx.)
- Old Regime Tax: ₹ 60,000 (approx.)
- Savings: ₹ 25,000
Even with irregular income, claiming 80C and 80D under the old regime produces noticeable savings.
5.5 NRI with Rental Income
Profile: 45-year-old NRI based in UAE, rental income ₹ 8 lakhs in India, foreign salary ₹ 20 lakhs, home loan interest ₹ 1.8 lakhs
- New Regime Tax: ₹ 2.75 lakhs (approx.)
- Old Regime Tax: ₹ 2.10 lakhs (approx.)
- Savings: ₹ 65,000
NRIs can leverage home-loan interest and rental loss carryforward under the old regime to reduce Indian tax liability.
5.6 Small Business Owner
Profile: 50-year-old proprietor of retail shop, business income ₹ 25 lakhs, expenses ₹ 5 lakhs, 80C ₹ 1.5 lakhs
- New Regime Tax: ₹ 5.2 lakhs (locked in)
- Old Regime Tax: ₹ 3.7 lakhs
- Savings: ₹ 1.5 lakhs
Despite the five-year lock-in, small business owners often save by claiming business expenses and 80C under the old regime.
5.7 Senior Citizen Retiree
Profile: 65-year-old pensioner, pension ₹ 4 lakhs, FD interest ₹ 3 lakhs, 80C ₹ 1 lakh
- New Regime Tax: ₹ 37,500
- Old Regime Tax: ₹ 25,000
- Savings: ₹ 12,500
Senior citizens gain extra on FD interest (80TTB) and higher exemption limits when using the old regime.
Section 6: Advanced Tax-Planning Strategies
- 80C Mix: Combine PPF, ELSS, NSC, and insurance to fully utilize ₹ 1.5 lakhs cap.
- 80D Timing: Pay premiums early in April to claim full deduction of ₹ 1 lakh.
- HRA Structuring: Document rent paid accurately; consider renting from relatives (with agreement).
- HomeLoan Prepayment: Prepay small chunks of principal to reduce cumulative interest deduction needs.
- Section 54/54EC: Reinvest capital gains in residential property or bonds to claim full exemption.
- 80G Donations: Donate to 50%/100% deductible charities and keep receipts.
- 80E Education Loan: Claim entire interest outgo, no upper limit.
Using these strategies in tandem can compound your tax savings under the old regime.
Section 7: Common Pitfalls & Compliance Tips
- Always preview regime selection before final submit.
- Maintain a digital folder of proofs (scanned receipts).
- File at least one week before deadline to handle errors.
- Verify Form 26AS matches your TDS claims.
- Use portal’s error-check feature for form validation.
Section 8: E-Filing Best Practices
- Use updated browsers & clear cache before login.
- Have your DSC available if audited.
- Validate with the ITR V XML utility if using offline filers.
- Download your ITR PDF & e-verify within 120 days.
- Respond quickly to any e-notices via the portal.
Section 9: Future Outlook & Budget 2025 Speculations
- Basic exemption threshold might rise under the old regime.
- Selective reintroduction of deductions in the new regime.
- More digital reporting for global income.
- Green and social impact deductions (ESG) could emerge.
Section 10: Special Topics
10.1 NRI Tax Planning
NRIs should claim Indian rental losses, home-loan interest, and limit global income reporting. Use DTAA to avoid double taxation.
10.2 Small Business Owners
Under Sections 44AD/44ADA, presumptive schemes simplify accounting but lock you into the new regime. Evaluate real expenses vs presumptive rates.
10.3 Freelancers & Gig Workers
Maintain detailed invoices and separate capital gains from business receipts. Use 80C, 80D, and Section 54 exemptions to reduce outgo.
10.4 Pensioners & Senior Citizens
Claim ₹ 50,000 standard deduction, 80TTB on FD interest, and medical reimbursements under 80D to maximize senior benefits.
Section 11: Comprehensive FAQs (20)
1. Can I switch to the old regime if my employer deducted TDS under the new regime?
Yes—your final choice is made when filing your ITR.
2. Do I need Form 10-IE to choose the old regime?
No—Form 10-IE is only for business income taxpayers opting into the new regime.
3. What is the deadline to switch regimes for FY 2024-25?
31 July 2025 for non-audit, 31 October 2025 for audit cases.
4. Can NRIs switch regimes on their Indian income?
Yes—NRIs have the same flexibility for India-sourced income.
5. If I choose the new regime this year, can I revert next year?
Salaried/pensioners can switch yearly; business taxpayers face a 5-year lock-in under Form 10-IE.
6. Are HRA and LTA available in the new regime?
No—common exemptions like HRA and LTA are removed under the new regime.
7. Can I claim home loan interest under the new regime?
No—home loan interest deduction (Section 24b) applies only in the old regime.
8. How do I calculate HRA exemption?
Exemption is the least of: actual HRA received; rent paid minus 10% of salary; 50% of salary (metro) or 40% (non-metro).
9. Is the standard deduction available in both regimes?
Yes—salaried individuals get ₹ 50,000 standard deduction under both regimes.
10. Can I revise my ITR to change the regime?
Yes—file a revised return within one year of the assessment year end.
11. Does Section 87A rebate apply in both regimes?
Yes—rebate up to ₹ 12,500 when taxable income ≤ ₹ 5 lakhs applies to both.
12. Are capital gains exemptions available under the new regime?
No—capital gains exemptions (Sections 54, 54EC) apply only under the old regime.
13. What if I forget to select a regime?
The ITR may be processed under the default new regime; you would need to revise to select old.
14. Can I claim education loan interest in the new regime?
No—Section 80E deductions are only in the old regime.
15. Are business losses handled differently?
Business losses can be set off and carried forward under both regimes, but new regime business taxpayers face lock-in.
16. Does switching affect advance tax?
No—advance tax paid is adjusted against final liability irrespective of regime chosen.
17. Are senior citizens’ special deductions (80TTB) in the new regime?
No—80TTB (interest on deposits) is available only under the old regime.
18. How does regime choice impact refunds?
Refund timelines remain standard; your selected regime only affects calculation, not processing speed.
19. Should freelancers use presumptive taxation?
Presumptive schemes simplify compliance but may forfeit deduction benefits—evaluate actual vs presumptive gains.
20. Can small business owners benefit from the old regime?
Yes—claiming actual business expenses and 80C can often save more than presumptive rates under the new regime.
Section 12: Pre-Filing Checklist & Glossary
12.1 Pre-Filing Checklist
- Form 16 / 16A
- Form 26AS
- 80C, 80D, 80E proofs
- Rent receipts & lease agreement
- Home loan interest certificate
- Donation receipts (80G)
- Bank statements (80TTA / 80TTB)
- DSC & CA certificates (if required)
- Verify Form 26AS vs TDS entries
12.2 Glossary of Key Terms
- ITR
- Income Tax Return
- PAN
- Permanent Account Number
- Aadhaar OTP
- One-Time Password for e-verification
- DSC
- Digital Signature Certificate
- DTAA
- Double Taxation Avoidance Agreement
- Section 115BAC
- New tax regime rules
- Section 80C
- Deduction up to ₹ 1.5 lakhs
- Section 80D
- Health insurance deduction
- Section 24b
- Home loan interest deduction
- Section 87A
- Rebate up to ₹ 12,500
Conclusion
This in-depth, guide has provided you with all the insights, examples, and step-by-step instructions to choose and file the optimal tax regime for FY 2024-25. By carefully analyzing your deductions, income streams, and long-term financial goals, you can maximize tax savings and stay fully compliant.
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