The Income Tax Return (ITR) filing season has begun. Now is the time to file Income Tax Returns for the assessment year 2025-26. Many people are still confused about whether to stay in the old tax regime or choose the new tax regime for filing returns. Talking about the new tax system, it does not offer tax-saving exemptions (Section 80C, 80D, 80G) like the old tax system. Now the question is, which tax system will be beneficial for you? It is very important to choose the right option to pay less tax on your hard-earned money.
2 Options for Return Filing
The old tax system allows you to avail of many exemptions and deductions. Such as tax exemption on investment in tax saving schemes, insurance premium, home loan interest, house rent allowance (HRA), or travel allowance. This reduces your taxable income. At the same time, the new tax system introduced under section 115BAC does not offer most of the exemptions and deductions. So, you have to decide whether you want to avail of exemptions or lower tax rates.
New tax system
Under the new tax system, there will be no tax on annual income up to ₹ 12 lakh. Under section 87A, a tax rebate will be available up to the limit of ₹ 12 lakh. At the same time, salaried people will also get the benefit of the standard deduction up to ₹ 75 thousand. In this way, the salaried class will no longer have to pay any tax on annual salary up to ₹ 12.75 lakh. Annual income above this will have to be taxed as per the new tax slab. This can be beneficial for those whose income is high and they are not able to avail of more exemptions.
Old tax system
The old tax system offers you a variety of tax exemptions that can significantly reduce your taxable income:
Section 80C: Deduction on investments in schemes like LIC, PPF, EPF, ELSS. This is one of the most popular tax-saving options.
Section 80D: Deduction on health insurance! Save tax while taking care of your and your family’s health.
Section 80DD: Deduction for physically handicapped dependent family member.
Section 80G: Deduction on charitable donations! Do good deeds and save tax too.
Section 10(13A): If you live in a rented house and the salary structure includes HRA, then you get tax exemption.
LTA (Leave Travel Allowance): Tax exemption on travel expenses for yourself and family within India. Fulfill your passion for traveling and save tax too.
Section 80E: Tax exemption on the entire interest paid on an education loan. For a maximum of 8 years.
Some special exemptions are also available in the new tax system
Although most of the exemptions are not there in the new tax system, some special exemptions are still available:
Section 80CCD(2): Exemption on contribution to pension scheme (NPS). Save tax along with securing your future.
Section 80CCH: Exemption on contribution to pension fund.
Section 80JJAA: Exemption related to recruitment of new employees.
Section 80CCH: Full exemption on the amount deposited in Agniveer Corpus Fund.
Which tax system is best for you
Which tax system is better for you depends on your annual income, your investment habits, and how many tax exemptions you can avail of. If you invest more and avail of many types of tax exemptions, then the old tax system may be more beneficial for you. At the same time, if your income is high and you do not invest much or are not able to avail of many exemptions, then the new tax system may be a better option for you due to lower tax rates.