With the Union Budget continuing to refine India’s tax structures, individuals now face an important choice: whether to opt for the old tax regime or the new one. Both come with distinct benefits, but the best option depends on your income, investments, and lifestyle.
This guide breaks down the tax slabs, deductions, and calculators to help you make an informed decision for FY 2024-25 (AY 2025-26).
Understanding the Old Tax Regime
The old regime allows taxpayers to reduce taxable income by claiming various deductions and exemptions.
Key Features:
- Exemptions like HRA (House Rent Allowance), LTA (Leave Travel Allowance).
- Deductions under Sections 80C, 80D, 80G, and more.
- Benefits for those with significant investments in insurance, PF, housing loan EMIs, and other tax-saving instruments.
Old Tax Regime Slabs (FY 2024-25):
- Up to ₹2.5 lakh – Nil
- ₹2.5 lakh – ₹5 lakh – 5%
- ₹5 lakh – ₹10 lakh – 20%
- Above ₹10 lakh – 30%
If you claim deductions (say ₹1.5 lakh under 80C, ₹50,000 under 80D), the old regime may help you save more.
Understanding the New Tax Regime
Introduced to simplify tax filing, the new regime offers lower tax rates but removes most exemptions and deductions.
Key Features:
- No major deductions (like HRA, 80C, 80D).
- Standard deduction of ₹75,000 for salaried/pensioners introduced in Budget 2024.
- Lower tax rates in most slabs.
New Tax Regime Slabs (FY 2024-25):
- Up to ₹3 lakh – Nil
- ₹3 lakh – ₹6 lakh – 5%
- ₹6 lakh – ₹9 lakh – 10%
- ₹9 lakh – ₹12 lakh – 15%
- ₹12 lakh – ₹15 lakh – 20%
- Above ₹15 lakh – 30%
The government has set the new tax regime as the default option from FY 2023-24 onwards, but you can still switch to the old one.
Which Regime Benefits You More?
If You Invest Heavily in Tax-Saving Instruments:
- Old Regime works better if you claim deductions like:
- Section 80C (PF, ELSS, life insurance) – up to ₹1.5 lakh
- Section 80D (health insurance) – up to ₹50,000
- Section 24 (home loan interest) – up to ₹2 lakh
- Ideal for salaried individuals with housing loans and medical expenses.
If You Prefer Simplicity or Have Fewer Investments:
- New Regime is beneficial if you:
- Don’t invest much in tax-saving schemes
- Want lower rates with less documentation
- Earn a higher salary without exemptions
Use Tax Calculators to Decide
To avoid guesswork, the Income Tax Department provides an online tax calculator on incometax.gov.in.
- Enter your income, deductions, and exemptions.
- Compare payable tax under both regimes instantly.
- Choose the regime that gives the lowest liability.
Common Mistakes to Avoid
- Assuming one regime is better for all – the choice is personal.
- Not calculating before filing ITR – always use a calculator.
- Ignoring employer-provided deductions – HRA, LTA can tilt the balance.
- Switching back and forth without planning – salaried individuals can choose each year, but businesses can’t switch frequently.
Final Thoughts
There is no one-size-fits-all answer to the “old vs new” tax regime debate. If you are disciplined with investments and maximize deductions, the old regime still holds strong. If you value simplicity and don’t use many tax-saving options, the new regime is attractive.
The smart move for FY 2024-25 is to run both calculations before filing your ITR. Choose the regime that saves you more while aligning with your financial goals.
