Auto vs Manual Selection of Regime in DIY Apps: What to Watch Out For
- PRITI SIRDESHMUKH
- Sep 17
- 9 min read
Choosing the right tax regime is one of the most critical decisions for salaried individuals and business professionals when filing Income Tax Returns (ITR). With the introduction of DIY tax apps, taxpayers can easily select between the old and new tax regimes. While these platforms simplify the filing process, selecting the correct regime requires understanding the implications of deductions, exemptions, and tax liability. Let's explore how auto selection works in DIY apps, potential risks, manual selection methods, and the legal considerations under Indian tax law, ensuring taxpayers make an informed choice while maximising benefits and minimising errors.
Table of Contents
How Does Auto Selection Work in DIY Apps?
DIY tax apps often provide an auto-selection feature that analyzes income, eligible deductions, and exemptions to suggest the most tax-efficient regime. The software considers available Section 80C deductions, HRA exemptions, standard deductions, and other applicable deductions. Based on the data input, it automatically recommends whether the old regime or the new regime is financially beneficial. While this feature is convenient, it relies entirely on the accuracy of the data provided by the taxpayer. Any missing or incorrect information can lead to a suboptimal recommendation.
Risks and Watch-Outs with Auto Selection
Auto-selection in tax apps carries certain risks. First, it may not account for recent changes in income, investments, or deductions. Second, some exemptions, such as HRA or LTA, may not be fully captured unless entered correctly. Additionally, auto-selection may overlook long-term tax planning strategies, like maximizing Section 80C contributions or claiming capital gains exemptions. Taxpayers relying solely on auto-selection may inadvertently choose a regime that results in higher taxes, penalties, or missed refunds.
Manual Selection: Pros and Cons
Manual selection allows taxpayers to compare tax liabilities across regimes based on their unique financial situation. Pros include complete control over deductions, exemptions, and accurate reflection of all income sources. Taxpayers can also account for investment plans or specific tax-saving options under the old regime. However, manual selection is time-consuming and prone to errors if taxpayers are unaware of applicable laws or overlook deductions. DIY apps often provide tools to assist manual calculations, combining convenience with accuracy.
What Indian Tax Law Says About Regime Choice
According to Indian tax law, individuals can choose between the old tax regime and the new tax regime. The old regime allows claiming various deductions under Sections 80C, 80D, 80E, and exemptions such as HRA and LTA. The new regime offers lower tax rates but with limited deductions. Taxpayers must make the regime choice at the time of filing ITR, and salaried individuals can switch each financial year. For businesses and professionals, the regime choice may also depend on compliance requirements and overall tax planning.
Specific Questions to Watch Out For in DIY Tax Apps
When using DIY tax filing apps, it is essential for taxpayers to pay close attention to the specific questions the app asks, as these determine the accuracy of the ITR and the final tax computation. One of the most critical aspects is ensuring all income sources are correctly captured. This includes salary, capital gains from stocks or mutual funds, rental income from property, interest income, and any freelance or side business earnings. Missing or incorrectly reporting any income source can lead to miscalculations, notices from the Income Tax Department, or delays in refund processing.
Another crucial area is claiming deductions, exemptions, and allowances. Apps often prompt users to select deductions under sections such as 80C, 80D, or 80TTA, and to indicate exemptions like HRA or LTA. While some apps suggest auto-selection based on typical profiles, taxpayers must review these prompts carefully. Blindly accepting defaults may result in errors or missed opportunities for legitimate tax savings.
Finally, DIY apps may include questions related to the old vs. new tax regime, investments, or TDS details. Making incorrect choices in these sections can directly impact your tax liability or delay refunds, emphasizing the need for careful review at every step. Using reliable apps like TaxBuddy ensures guidance is provided while maintaining flexibility for accurate inputs.
How TaxBuddy Ensures Accurate Regime Selection
TaxBuddy combines AI-driven tools with expert guidance to ensure accurate regime selection. Its platform evaluates income, deductions, and exemptions and compares tax liabilities across both regimes. TaxBuddy also provides suggestions and alerts to ensure no deductions are missed and helps avoid common filing errors. The platform’s seamless interface allows taxpayers to confidently select the best regime while ensuring compliance with current Indian tax laws.
Comparing Old vs New Regime Benefits in DIY Apps
Old regime benefits include claiming deductions for investments, insurance premiums, home loan interest, and HRA exemptions. New regime benefits offer lower tax rates without deductions. DIY apps often provide side-by-side comparisons of tax liability under both regimes, highlighting savings potential. Taxpayers should use these comparisons alongside personal financial goals, factoring in long-term savings and investment strategies.
Timing and Deadlines for Selecting a Tax Regime
Choosing the appropriate tax regime is a critical step in the ITR filing process, as it determines your tax liability, deductions, and exemptions for the financial year. For FY 2024-25, non-audit taxpayers must make this selection before filing their ITR, and with the extended deadline, the final date is September 15, 2025. Missing this deadline forces taxpayers to file a belated return, which not only attracts penalties and interest on any unpaid taxes but may also restrict eligibility for certain deductions, exemptions, and rebates that are available only if the ITR is filed on time.
Timely selection of the tax regime ensures accurate tax computation, reflecting all eligible deductions, such as under Sections 80C, 80D, or 80E for the old regime, and allows full utilization of rebates and exemptions applicable under the new regime. Additionally, filing within the prescribed period speeds up refund processing, as the Income Tax Department typically processes returns submitted before the extended deadline faster than belated filings.
Avoiding Common Mistakes in Regime Selection
Despite the apparent simplicity of choosing a tax regime, many taxpayers make avoidable errors that lead to higher tax liability or delayed refunds. A common mistake is relying solely on auto-selection in ITR utilities, without reviewing whether the choice maximizes deductions or minimizes taxes. Another frequent oversight is ignoring eligible exemptions under the old regime, such as HRA, standard deduction, or home loan interest, which may offer significant tax savings if carefully calculated.
Taxpayers also sometimes misreport income sources, especially if there are multiple streams such as salary, rental income, or interest income, which can affect the optimal regime choice. Failing to consider the long-term implications of choosing the new regime, which limits deductions, can also impact future tax planning and investment strategies.
Using expert-assisted platforms like TaxBuddy can prevent these errors. Such platforms provide real-time guidance, help verify the impact of regime selection on tax liability, and ensure accurate reporting of income and deductions. With AI-driven assistance, taxpayers can make informed decisions, claim all eligible benefits, and ensure faster, error-free ITR filing.
Tools and Features to Assist Manual Selection
DIY tax filing applications provide a wide range of tools and features designed to simplify the manual selection process for taxpayers. These tools include interactive calculators that automatically compute potential tax liabilities based on entered income, deductions, and exemptions. Comparison tools allow taxpayers to evaluate multiple tax regimes side by side, helping them determine the most beneficial option. Guided prompts and walkthroughs ensure that no critical step is missed during filing.
Additional features, such as deduction trackers and exemption checklists, provide a structured way to review eligible benefits and avoid missing any tax-saving opportunities. Regime comparison charts give a clear visual representation of tax implications under different regimes, helping taxpayers make informed decisions tailored to their financial situation. Platforms like TaxBuddy enhance this experience further by offering real-time insights, alerts for missing or mismatched information, and automated suggestions. This combination reduces errors, streamlines filing, and allows taxpayers to maintain full control over their tax submissions.
Monitoring and Revising Your Regime Choice
Selecting a tax regime is not a one-time decision. Taxpayers need to actively monitor updates to their income, deductions, and exemptions throughout the financial year until final submission. Circumstances such as additional income sources, delayed TDS credits, or unexpected deductions may require revising the initial regime choice. Making these revisions promptly ensures compliance with tax laws and prevents potential errors or mismatches during processing.
Modern platforms like TaxBuddy simplify this monitoring and revision process. Users can easily update their tax details, adjust deductions, and modify their regime selection in response to changes in financial data. Real-time alerts notify taxpayers about critical updates, missing documentation, or inconsistencies in their filings. By leveraging these features, taxpayers can minimize errors, reduce the risk of penalties, and optimize their tax planning. This proactive approach ensures that the final submitted return accurately reflects the taxpayer’s financial situation while taking full advantage of allowable benefits.
Conclusion
Selecting the right tax regime is a crucial step in ensuring tax efficiency and compliance. DIY apps simplify the process, but a careful review of auto-selection recommendations, manual checks, and expert guidance is essential. For anyone looking for assistance in tax filing and accurate regime selection, it is highly recommended todownload the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Can I switch between the old and new tax regime each year? Yes, salaried individuals and other eligible taxpayers can choose either the old or new tax regime every financial year while filing their ITR. The choice is independent for each year and can be based on current income, eligible deductions, and exemptions. However, careful analysis of taxable income, deductions under Sections 80C, 80D, HRA, and other exemptions is essential to determine which regime is more beneficial.
Q2. Does TaxBuddy offer both self-filing and expert-assisted plans? Yes, TaxBuddy provides flexible options for taxpayers. Those comfortable with DIY filing can use the self-filing plan, which guides users step by step. For taxpayers who prefer professional assistance, expert-assisted plans are available, where experienced tax professionals ensure accuracy, minimize errors, and optimize deductions.
Q3. What happens if I select the wrong regime in a DIY app? Selecting the wrong tax regime may result in higher tax liability or missing out on eligible exemptions. Most platforms, including TaxBuddy, allow users to review calculations before submission. Corrections can be made before final filing, and if the ITR is submitted with an incorrect regime, a revised return can be filed within the allowed timeline.
Q4. Are HRA and LTA exemptions allowed in the new tax regime? No, most exemptions such asHouse Rent Allowance (HRA) and Leave Travel Allowance (LTA) are only available under the old tax regime. The new regime focuses on lower tax rates with fewer exemptions. Taxpayers relying on these benefits should calculate the tax difference before choosing the regime.
Q5. How do I verify TDS credits before choosing a regime? TDS credits can be checked using Form 26AS on the income tax e-filing portal. This form consolidates all TDS deducted by employers, banks, and other entities. Accurate verification ensures no mismatch occurs when filing ITR, preventing processing delays and enabling correct regime selection.
Q6. Can TaxBuddy auto-calculate taxes under both regimes? Yes, TaxBuddy’s platform automatically compares tax liabilities under the old and new regimes. It factors in eligible deductions, exemptions, and TDS credits to suggest the most tax-efficient option. This saves time and reduces the risk of miscalculations.
Q7. Is manual regime selection more accurate than auto-selection? Manual selection allows full control and customisation based on specific deductions and exemptions, but it requires careful verification. Auto-selection is convenient and ensures faster comparison, but it relies on accurate data input. Platforms like TaxBuddy combine both approaches for precision and simplicity.
Q8. What is the deadline for regime selection for FY 2024-25? For non-audit taxpayers, the regime choice must be made while filing ITR by September 15, 2025. Businesses requiring audits must adhere to the extended deadlines as per their category. Choosing the regime by the filing deadline ensures compliance and avoids additional penalties.
Q9. Can I revise my regime choice after submitting the ITR? Yes, taxpayers can revise their regime choice by filing a revised return under Section 139(5) before the end of the allowed period. This option allows corrections for errors, missed deductions, or reconsideration of the optimal tax regime based on updated information.
Q10. Are long-term capital gains considered for regime choice? Yes, all income sources, including salary, business income, and long-term capital gains (LTCG), must be included when selecting the tax regime. LTCG may attract tax even in the new regime, so it is critical to make an informed decision about the overall tax liability.
Q11. Does TaxBuddy help prevent errors during regime selection? Yes, TaxBuddy’s platform highlights missing deductions, mismatched TDS credits, or incomplete data entries. It ensures that taxpayers avoid common mistakes, optimise tax savings, and select the most beneficial regime for their financial situation.
Q12. Can DIY apps accurately compare old vs new regime benefits? While many DIY apps provide a general comparison, expert-assisted platforms like TaxBuddy offer detailed analysis. TaxBuddy considers all income sources, exemptions, deductions, and TDS credits to provide an accurate, reliable comparison, helping taxpayers make informed decisions with minimal risk.
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