The finance bill 2020 allows salaried individuals and pensioners with no business income to switch between the two tax regimes every assessment year as per their prevailing financial situation.
Only salaried individuals can opt out of any of the regimes every year. Also, the taxpayer is free to choose a different regime than he/she chose for TDS deduction with the employer, i.e. the employee can use a different regime than the one he opted for before while filing an ITR.
While Filing an ITR
Anytime in the financial year before the ITR filing, you cannot switch to another regime.
So, if the annual basic salary of the employee is Rs 5 lakh, one can avail a deduction of up to Rs 50,000 if the employer contributes towards employees NPS account. Going forward, if the new tax regime becomes the norm, as an employee making use of Section 80CCD(2) may help them save taxes.
Also, individuals with an income bracket between Rs 5-10 lakh with lower deductions claims will benefit from the new regime. In contrast, individuals under a higher income tax bracket above Rs 15 lakh of income per annum can benefit more from the existing regime by making tax-saving investments.
Although it's a part of your salary, HRA, unlike basic salary, is not fully taxable. ... Thus, if you opt for the new income tax regime either in FY 2020-21 or FY 2021-22, then you will not be able to claim tax-exemption on HRA.
If an individual has a salary of Rs 8 lakh per annum, and he/she has opted for a new income tax slab regime, then an income tax will be Rs 46,800. It is calculated without any exemptions and deductions. An individual can save Rs 28,600 more as compared to an old tax regime.
The old tax regime is with various deductions to save tax. One can make specific tax saving investments and income to the extent of those investments would be free from taxation. The new tax regime is without any deduction. One can avail lower rates of new tax regime and cannot claim any deduction further to save tax.