Taxpayers will soon be able to file their returns for the recently concluded financial year through the official Income Tax Department website. It is mandatory to choose between the old and new tax regime while filing the online form — with specific exemptions and deductions available for individuals. The process can be somewhat complicated and it is advisable to gather all relevant documents and take note of major tax provisions ahead of time.
Old tax regime vs New tax regime
There is no obvious answer when it comes to choosing the right tax regime for each individual — depending on your income, investments and eligible deductions. Salaried individuals opting for the new tax regime will be exempted from paying taxes on income up to Rs 7 lakh for the recently concluded financial year. It offers simplified tax slabs with limited deductions. From FY25 the standard deduction under the new tax regime was raised to Rs 75,000.
Meanwhile the old tax regime allows taxpayers to claim a greater number of deductions and exemptions such as Section 80C, Section 80D, housing rent allowance and more. The standard deduction under this system remains unchanged at Rs 50,000.
5 major income tax provisions to keep in mind
Tax-saving via investments: Individuals opting for the old tax regime can avail a deduction up to Rs 1.5 lakh annually under Section 80C through various strategic investments. This includes a variety of financial avenues including PPF, EPF, ELSS, tax saving fixed deposits, Sukanya Samriddhi Yojana and even life insurance premiums. The new tax regime has somewhat limited options for saving taxes via investments — with only Sections 80CCD(2), 80CCH, and 80JJAA available.
Deduction on Home Loan Interest – Section 24 (b) of the Income Tax Act allows people to claim tax deductions for the interest that they pay towards home loans or housing improvement loans. It is applicable under both tax regimes — with taxpayers able to claim the entire interest for properties that have been let out. Only the old tax regime outlines an upper limit for deduction of interest paid (Rs 2 lakh) for self-occupied property.
Exemption for house rent and other allowances: Many taxpayers will be able to claim a partial exemption through HRA if they are living in rented accommodations. Employees will have to submit rent receipts and other documents if the total rent exceeds Rs 1 lakh annually. Several other expenses incurred by employees in the line of duty are also eligible for tax exemptions. Section 10(5) pertains to leave travel allowance exemptions while Section 10 (10) outlines conditions under which exemptions can be claimed for gratuity income. Section 10(10AA) pertains to leave encashment while Section 10 (14) allows for exemption for food and internet allowances. While some of these sections are applicable for all taxpayers others will exclusively apply for those selecting the old tax regime.
Deduction linked to health insurance: Section 80D offers a deduction up to Rs 1 lakh annually on the basis of premiums paid towards a health insurance plan or a health rider for a life insurance plan. Taxpayers can claim Rs 25,000 for premiums paid towards health insurance for themselves or their spouse and children — with the amount going up to Rs 50,000 if it is a senior citizen. There is also an separate deduction of Rs 25,000 that can be claimed for parents (again updated to Rs 50,000 for senior citizens).
Penalty for late returns: Filing income tax returns after the due date can lead to a fine of Rs 1000 for income below Rs 5 lakh. The penalty amount increases to Rs 5000 for those with higher income under Section 234F. Repeated delays in filing tax returns can also result in interest payments and additional fines. It can also lead to a loss of benefits such as carrying forward of capital gains/losses or hinder upcoming refunds.
