New versus Old regime: Does opting for the old income tax regime for TDS on salary make ITR processing, refunds easier?


New vs old tax regime: At the beginning of every financial year, salaried individuals have to select an income tax system For TDS (Tax Deducted at Source) on their salary. They have to tell their employers whether they prefer the old or new tax systemBecause their employer will deduct tax from their salary as per the system chosen Income tax brackets.but selects old tax system Will the process of ITR (Income Tax Returns) and income tax refund claims become easier?
According to an ET report, if someone opts for the old tax regime for TDS on their salary and claims any allowed deductions, these deductions will be reflected on Form 16 if they provide the necessary proof to their employer on time. Are. However, if they choose the new tax regime, only standard deductions and section 80CCD(2) deductions (if claimed and eligible) will be shown on Form 16.
However, some individuals may initially choose the new tax regime for TDS on salary but may later decide to file their ITR under the old tax regime as it may seem more beneficial at that time. In such cases, they have to calculate their own deductions to reduce their tax burden. Moreover, the Income Tax Department is more likely to ask for proof and documents for the deductions claimed when they are not reflected in Form 16 from the employer.
This problem does not arise if one switches from the old tax regime (selected at the beginning of the financial year for TDS on salary) to the new tax regime while filing one's ITR. This is because the two main deductions allowed under the new tax regime are also allowed under the old tax regime. Therefore, these deductions will still be reflected in the Form 16 prepared by the employer under the old tax regime.
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Aarti Raote, partner, Deloitte India, explains that if the income tax department finds any disparity between the income statement, exemptions and deductions on Form 16 compared to what is declared in the income tax return, they may raise questions. Additional deductions and exemptions must be supported with evidence. In many cases, during initial processing of ITR by the CPC (Centralized Processing Centre) of the Income Tax Department, such claims are rejected. As a result, the employee may need to file a rectification application to certify these additional deductions.
Shalini Jain, Tax Partner-People Advisory Services, EY India, was quoted as saying, “In case of a mismatch, the individual is likely to receive an electronic notification from the tax authorities with the information required to resolve it.” Tax returns and Form 16 are required to be filed.

Choosing a tax regime for TDS on salaries: What should taxpayers do?

Raote suggests that taxpayers play it safe by opting for the old tax regime for TDS on salaries, claim all eligible exemptions and deductions and switch to the new tax regime in the meantime. filing ITR If it proves to be more beneficial. “This will result in fewer questions being asked from the tax department. However, this will also double the administrative work for the employee in terms of submitting evidence to the employer.”
This is because under the old tax regime, the employee was required to submit proof to the employer, but those documents may not be required while filing ITR under the new tax regime.
Certainly, the ideal scenario would be that the tax regime chosen for TDS from salaries at the beginning of the financial year aligns with the regime under which ITRs are expected to be filed.
Jain says that when the income tax return information is aligned with Form 16 in terms of income and exemptions claimed, the income tax return process becomes easier. She explains, “As long as the deductions are genuine and calculated correctly, there is no harm in switching from the new to the old tax regime when filing a tax return; responding to mismatched information is merely procedural.”
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Although there is no strict rule, it is advisable to choose your income tax regime for TDS from salary wisely to ensure consistency while filing your ITR. Avoiding subsequent changes between systems is likely to help simplify ITR processing.
It is important to remember that the new tax regime is the default option. If employees do not inform their employers about their tax regime preference, tax will be deducted from their salaries as per the new tax regime. Additionally, most employers do not allow changes in tax arrangements during the financial year. Therefore, if a salaried individual prefers the old tax regime, they should inform their employer accordingly.
Many commonly claimed deductions such as Section 80C, Section 80D, Section 80CCD(1B), as well as tax exemption on house rent allowance and leave travel allowance, are not available under the new tax regime. Instead, individuals can claim a standard deduction of Rs 50,000 from their salary and pension income along with Section 80CCD(2) deduction for employer's contribution to the National Pension Scheme (NPS) account. In contrast, the old tax system allows these deductions and many other deductions.

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