Calculate Both Tax Regimes Annually: Save ₹50K-₹2L
Calculate both regimes before ITR. Choose optimal. No lock-in. Save ₹50K-2L.
What is This Hack?
New regime is default but NOT mandatory. Calculate both old and new tax regimes annually before ITR filing. No lock-in for business income. At ₹15-30L with deductions, old regime saves ₹50K-2L. Choose lower tax liability.
How It Works
The new tax regime is the default since FY 2023-24 but is NOT mandatory. You can choose between old and new regime every year when filing ITR. There's NO lock-in, especially for business/professional income. Calculate tax under both regimes annually and select the one with lower liability. At ₹15-30L income with significant deductions (₹1.5L 80C, HRA, home loan interest), old regime typically saves ₹50K-2L despite lower rates in new regime.
₹25L Salary with ₹3L Deductions - Old Regime Saves ₹1.32L
Situation
Without This Hack
With This Hack
💰 ₹4.654L (old) vs ₹4.602L (new) - New regime saves ₹52K. BUT if you have higher home loan interest (₹2L) or more HRA, old regime can save ₹50K-1L+. Always calculate with YOUR actual numbers.
Common Pitfalls to Avoid
- Solution: Always explicitly select regime in ITR Part A. Don't rely on defaults.
- Solution: Set calendar reminder every May to recalculate both regimes before ITR deadline.
- Solution: Know the rules: Business income = switch every year freely. Salary = inform employer at start of FY.
- Solution: Use updated calculators. Manually verify ₹75K standard deduction is deducted in new regime calculation.
- Solution: Add employer NPS to deductions in BOTH old and new regime calculations.
Prerequisites & Requirements
- Income details and proof
Salary slips, Form 16, business income P&L, other income statements. You need accurate gross total income to calculate both regimes.
- Deduction proofs and investment details
80C investment proofs (PPF, ELSS, LIC), rent receipts (HRA), home loan interest certificate, NPS statements, 80D medical insurance receipts. These determine old regime tax.
- Tax calculator or Excel sheet
Use online income tax calculator with regime comparison feature or create Excel with old/new regime formulas. Must include updated FY 2025-26 slabs and ₹75K standard deduction.
- Access to income tax e-filing portal
To select chosen regime in ITR form (Part A - General Information). Regime choice is captured during ITR filing.
- 30 minutes annually for calculation
Time investment to calculate both regimes, compare, and make informed choice. One-time annual effort saves ₹50K-2L.
- Updated tax knowledge or CA consultationOptional
Tax slabs, deductions, and rules change in every budget. Stay updated via reliable sources (Income Tax Dept, Cleartax, ET) or consult CA for complex cases.
Key Benefits
- Potential savings: ₹50,000 - ₹2,00,000 annually
- Implementation time: 30 minutes annually
- Legal status: fully legal
- Risk level: zero
Important Considerations
This hack has a zero risk level. While it's completely legal, proper implementation requires careful attention to compliance requirements. Consider consulting a CA for personalized guidance.
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Step-by-Step Guide
Gather all income and deduction details
Collect salary slips, Form 16, rent receipts, 80C investments (PPF, ELSS, LIC), HRA, home loan interest certificate, NPS statements, medical insurance premiums, education loan interest.
Calculate tax under old regime
Use old regime tax slabs (₹2.5L exemption, 5%-30% slabs). Claim all deductions: 80C (₹1.5L), 80D (₹25K/₹50K), HRA exemption, home loan interest (₹2L), NPS 80CCD(1B) (₹50K), standard deduction (₹50K FY24, ₹75K FY25).
Calculate tax under new regime
Use new regime tax slabs (₹3L exemption FY24, ₹3L FY25, 5%-30% slabs). NO deductions except standard deduction (₹50K FY24, ₹75K FY25). No 80C, no HRA, no home loan interest.
Compare both regime taxes - choose lower
Subtract new regime tax from old regime tax. Positive difference means old regime saves money. Negative means new regime is better. For ₹15-30L with ₹2-3L deductions, old regime typically wins by ₹50K-2L.
Select chosen regime in ITR form
When filing ITR, select your chosen regime in 'Part A - General Information' section. For ITR-1/ITR-4: tick old or new regime checkbox. For ITR-3: Schedule BP - select regime. You can switch again next year.
Repeat calculation every year
Your deductions, income, tax slabs change annually. New regime rates improved in Budget 2023. Always recalculate both regimes before ITR deadline. Takes 30 minutes, saves ₹50K-2L.