Should I choose the old tax regime or the new tax regime under Section 115BAC

Question

I keep hearing about the old and new tax regimes and I do not know which one benefits me as a salaried employee with home loan and insurance deductions. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

Should I choose the old tax regime or the new tax regime under Section 115BAC is governed in India primarily by Income-tax Act, 1961, Section 115BAC, Income-tax Act, 1961, Section 80C and Income-tax Act, 2025. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 115BAC of the Income-tax Act, 1961 provides a concessional slab-rate structure, referred to as the new regime, which is now the default regime for individuals and Hindu Undivided Families, in exchange for foregoing most exemptions and deductions such as Section 80C investments, Section 80D health insurance premium, and house rent allowance exemption under Section 10(13A).

Taxpayers with substantial deductions such as home loan interest under Section 24(b), Section 80C investments, and medical insurance under Section 80D often find the old regime more beneficial, while those with few deductions typically pay less tax under the new regime, so the choice depends entirely on your individual deduction profile and should be recalculated each year.

Salaried individuals and pensioners without business income can switch between the old and new regime every year simply by indicating their choice while filing the return, whereas individuals with business or professional income face restrictions on switching back to the old regime once they opt out, under the proviso to Section 115BAC.

If you do not explicitly opt for the old regime while filing your return, the new regime under Section 115BAC applies by default, so salaried employees who want to claim old-regime deductions must actively select the old regime option in the return form or with their employer at the start of the financial year for TDS purposes.

What to do next: 1) List all deductions you are eligible for under the old regime; 2) Compute tax liability under both regimes using the current slabs; 3) Inform your employer of your chosen regime for TDS purposes; 4) Confirm your final choice while filing the annual return.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income-tax Act, 1961, Section 115BAC carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.