ITR filing due date extended: September 16 is the last chance to opt for the old tax regime

Old Tax vs New Tax Regime

Choosing between the old and new tax regimes often raises doubts about their flexibility. Here’s what salaried employees and business income earners need to know before deciding.

Moneycontrol’s Ask Wallet Wise initiative offers expert advice on matters of personal finance and money. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address your queries.

How many times can a salaried employee switch between the new and old tax regimes? If I opt for the new regime this year, can I revert to the old one next year, and again switch back to the new regime thereafter? Do the provisions for long-term and short-term capital gains remain the same under both regimes? Are there any advantages or disadvantages in the capital gains tax between these two regimes?

Expert Advice: The New Tax Regime is the default regime. Salaried individuals (those without business income) can switch between the old and new regimes every year without any restriction on the number of times they do so. To opt for the old regime, you must exercise this choice while filing your ITR within the due date. If you miss the due date, you will mandatorily fall under the new regime. Importantly, the regime you choose while filing your ITR can be different from the one you declared to your employer for TDS purposes.

For taxpayers with business income, the rule is stricter. Once you opt for the old regime, you must continue with it as long as you have business income. You can switch to the new regime only once, and once you do, you cannot revert to the old regime. However, if you cease to have business or professional income in a particular year, you can again freely choose between the two regimes.

Regarding capital gains, there is no difference between the old and new regimes. The taxation rules and exemptions for both long-term and short-term capital gains remain the same. Therefore, your choice of regime does not affect the tax treatment of capital gains.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.