How this small taxpayer saved tax by a last-minute switch to the old regime before filing ITR

Reason: He had a total salary income of only ₹8.84 lakh in FY 2024-25 and some investments eligible for deductions. But he believed he didn't have enough deductions that would help him save more under the old tax regime.

However, last-minute calculation and switch to the old regime not only helped him avoid paying extra tax but also helped him claim a small refund.

Let's see his numbers to understand how he benefited from the last-minute switch:

Gross salary: ₹8,84,550

Dividend income: ₹2733

Interest from savings account: ₹2248 (exempted from tax up to ₹10,000 under Section 80TTA)

Interest from income tax refund: ₹718

LTCG from equity shares: ₹90,000 (exempted under Section 112A)

Eligible deductions:

Section 80C investments (including home loan principal, life insurance, and provident fund): ₹1.5 lakh

Home loan interest: ₹93,554

Section 80D deduction: ₹5000

Standard deduction in old regime: ₹50,000

Standard deduction in new regime: ₹75,000

Tax calculation under old regime

Taxable salary: Gross salary-standard deduction = ₹8,84,550-₹50,000 = ₹834,550

Total income = ₹834,550+₹2733+₹718 = ₹838,001

Total deductions = ₹1,50,000+₹93,554+₹5000 = ₹248,554

Taxable income = ₹838,001-₹248,554 = ₹5,89,447

Tax as per slabs:

Up to ₹2,50,000: Nil

₹2,50,000-₹5,00,000 @5% = ₹12,500

₹5,00,000-₹5,89,447 @20%: ₹17,889

Total tax = ₹17,889+₹12,500 = ₹30,389

Tax after cess at 4% =₹30,389+₹1215 = ₹31,604 (approx).

Tax calculation under the new regime

Salary: ₹8,84,550

Taxable salary after standard deduction of ₹75,000 = ₹8,09,550

Total taxable income = ₹8,09,550+₹2733+₹2248+₹718 = ₹815,249

Tax calculation as per the new regime slabs:

Up to ₹3,00,000: Nil

₹3,00,001-₹7,00,000 @5% = ₹20,000

₹7,00,001-₹815,249 @10% = ₹11,525

Total tax = ₹11,525+₹20,000 = ₹31,525

Tax after cess at 4% = ₹31,525+₹1261 = ₹32,786

Thus, the total tax liability under the old regime is ₹31,605, which is lower than the new regime liability of ₹32,786. As his employer had already deducted TDS of ₹32,248, he could claim a refund of ₹644 by making the last-minute switch to the old regime.

The due date to file ITR for AY 2024-25 is September 15, 2025. File it fast if you haven't.