Old vs New Tax Regime
Definition
The choice Indian individual taxpayers make between the old regime (higher slab rates but most deductions and exemptions available) and the new regime (lower slab rates but most deductions withdrawn). The better option depends on the deductions a taxpayer can actually claim.
Common questions
Can I switch between regimes every year?
Salaried taxpayers without business income can generally choose each year, while those with business income face restrictions on switching back. The current rules should be confirmed for the assessment year.
Related Terms in India GST
Standard Deduction (India)
A flat deduction from salary and pension income available to Indian taxpayers without the need to prove expenses. The amount and its availability under each tax regime are set by the Finance Act and should be checked for the year concerned.
HRA Exemption
A partial exemption from tax on House Rent Allowance received by salaried employees in India under the old regime, computed as the least of the actual HRA, rent paid over a threshold, and a percentage of salary that depends on the city.
Presumptive Taxation
A simplified method of taxing income at a deemed percentage of turnover or receipts rather than on actual profit computed from full books. It reduces compliance for eligible small businesses and professionals within prescribed limits.
Minimum Alternate Tax (MAT)
A tax ensuring companies with large book profits but low taxable income due to exemptions still pay a minimum amount, computed on adjusted book profit. Credit for MAT paid can be carried forward and set off in later years.
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