Choosing to pay taxes under the "old regime" or the "new regime" was the buzzword of the year 2024 when an individual submitted their income return. It appears that salaried people are always discussing which regime would be best for them given their income level.
 
Development of the "new regime"
 
The idea of a "new regime" of taxation did not exist until 2020. We now informally refer to this as the "old regime" since there was just one slab rate of taxes that applied to people. Following the introduction of Section 115BAC, individual taxpayers were given the choice between the new concessional rates and the current tax rates. There was a catch, though: taxpayers who chose the concessional rate would forfeit a variety of tax-saving options (such as exemptions and deductions).

Over 70 exemptions and deductions available under the old regime, some of the prominent ones including:

House Rent Allowance under Section 10(13A)

Leave Travel Allowance under Section 10(5)

Interest of home Loan under Section 24(b)

Investments made in Provident Funds/ELSS Schemes/Insurance Premium under Section 80C

Medical insurance under Section 80D

Investments made in pension schemes

People might maximize their taxes with smart tax planning, even if the total exemptions and deductions that could be claimed under the applicable regulations had monetary restrictions.
 
But as time has gone on, changes to the Income Tax Act have shown that the government wants people to abandon the previous system and switch to the new one. The following occurrences can be used to infer some of these signs:
 
The standard deduction of INR 50,000, which was previously solely accessible under the previous administration, was made available to the incoming administration as well in the Union Budget 2023.
 
The standard deduction under the new system was raised to INR 75,000 in the Union Budget 2024. But under the previous administration, the standard deduction was still INR 50,000.
 
The new regime became the default regime for all individual taxpayers, meaning that they had to choose the previous regime starting with Assessment Year 2024–2025.
 
 
Because it eliminates the need for tax preparation, evidence, and the filing of necessary paperwork, the new system is far easier. As a result, the government wants to support the new dictatorship. At first, it was favored by those who did not profit from tax-saving options and who wanted a simple, hassle-free filing process, but it has gradually grown to be the method of choice for the great majority of taxpayers. The shift from the old system encouraging long-term savings and investments, to the new system aiming for simplicity and ease of compliance is evidently visible.

A comparison of the two regimes would make it abundantly evident that the government wants to make the process more efficient and guarantee a more straightforward tax environment in order to guarantee compliance. It is clear that some people would still benefit from the previous system, but doing so would need careful tax planning, utilizing several exclusions and deductions, and completing the necessary paperwork, which would increase the cost of compliance.
 
Without a doubt, the new system seeks to increase tax compliance. It makes filing taxes easier and reduces the possibility of mistakes and underreporting. It seeks to give taxpayers a simplified process that will result in long-term tax predictability and compliance. With 50% fewer provisions in the new direct tax law, which is expected to be released next week, it is probable that the previous regime will soon be relegated to the annals of tax history.
 
 
 

 
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SIBY JEYYA

02/02/2025 11:38 AM