The old tax regime is beneficial for individuals who can take advantage of various deductions and exemptions. The choice between the old and new tax regimes largely hinges on the amount of deductions one can claim.
The greater the deductions, the more tax savings one can achieve with the old regime; otherwise, the new tax regime may be more advantageous, say experts. A significant distinction between the two regimes is the removal of most exemptions and deductions in the new tax regime. Notable deductions that are eliminated include those under Section 80C (up to R1.5 lakh for investments in EPF, PPF, ELSS, life insurance premiums, and the National Pension System), Section 80D (health insurance premiums and specified medical expenses for senior citizens), Section 80CCD (1B) for additional NPS investments, as well as deductions for House Rent Allowance (HRA), Leave Travel Allowance (LTA), and interest on loans for self-occupied properties. Additionally, losses from rental properties cannot be offset against other income categories and cannot be carried forward.
However, some deductions are still available under the new tax regime, such as a standard deduction of R50,000 and deductions for employer contributions to the NPS under Section 80CCD(2). Moreover, resident individual taxpayers with an income of up to R7 lakhs are not required to pay any tax due to the rebate under Section 87A.