The newly proposed Income Tax draft rules have once again drawn attention to the old tax regime, triggering discussions among taxpayers and financial experts. While the government has been promoting the simplified new tax regime in recent years, the latest draft suggests that the traditional system continues to remain relevant for a large section of taxpayers.
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New Income Tax Draft Rules Bring Old Tax Regime Back into Focus
According to experts, the renewed focus on the old tax regime is primarily due to the wide range of exemptions and deductions it offers. Benefits such as deductions under Section 80C, 80D, HRA, LTA, home loan interest, and other savings-linked exemptions make the old regime attractive, especially for salaried individuals and middle-income groups who actively invest in tax-saving instruments.
Income Tax Department is expected to provide further clarity
The draft rules indicate that taxpayers will continue to have the option to choose between the old and new regimes, allowing them to select the structure that best suits their financial planning. While the new regime offers lower tax rates with fewer compliances, it removes most deductions, which may not be beneficial for those with structured savings and investments.
Tax professionals believe that the government’s move reflects an understanding that a one-size-fits-all approach may not work for India’s diverse taxpayer base. Individuals with housing loans, insurance policies, provident fund contributions, and medical expenses often find the old regime more tax-efficient despite higher slab rates.
The Income Tax Department is expected to provide further clarity once the draft rules are finalized. Until then, experts advise taxpayers to carefully evaluate both regimes based on income structure, deductions, and long-term financial goals before making a choice for the upcoming assessment years.
