Introduction
As the ITR filing season for FY 2024–25 (AY 2025–26) begins, individual taxpayers face a key decision: Should you opt for the Old Tax Regime or the New Tax Regime?
With the government introducing important updates in recent budgets, including making the New Regime the default, it’s crucial to understand the tax implications, benefits, and trade-offs of both systems.
What’s New for FY 2024–25?
Here are the latest changes impacting your tax planning:
- New Tax Regime is now the default (as per Section 115BAC(1A)).
- Standard deduction of ₹50,000 is now available under the New Regime (previously only under the Old Regime).
- You can still choose the Old Regime, but must actively opt for it while filing your return.
- Revised slab structure under the New Regime provides lower tax rates.
Income Tax Slab Comparison: FY 2024–25
| Income Slab | Old Regime | New Regime (Default) |
| ₹0 – ₹2.5 lakh | Nil | Nil |
| ₹2.5 – ₹3 lakh | 5% | Nil |
| ₹3 lakh – ₹6 lakh | 5% | 5% |
| ₹6 lakh – ₹9 lakh | 10% | 10% |
| ₹9 lakh – ₹12 lakh | 15% | 15% |
| ₹12 lakh – ₹15 lakh | 20% | 20% |
| Above ₹15 lakh | 30% | 30% |
Section 87A Rebate:
- Old Regime: No tax if total income ≤ ₹5 lakh
- New Regime: No tax if total income ≤ ₹7 lakh
Key Differences Between Old & New Regimes
| Feature | Old Regime | New Regime |
| Standard Deduction | ₹50,000 | ₹50,000 |
| Section 80C (LIC, PPF, ELSS) | Allowed | Not Allowed |
| Section 80D (Medical Insurance) | Allowed | Not Allowed |
| HRA / LTA / 80E | Allowed | Not Allowed |
| NPS (80CCD) | Allowed | Not Allowed |
| Home Loan Interest (Self-occupied) | Allowed | Allowed |
| Simplicity | Complex | Simple |
Example: Tax Calculation (Salaried Individual)
Assumption: Annual Income = ₹12,00,000
| Detail | Old Regime | New Regime |
| Gross Income | ₹12,00,000 | ₹12,00,000 |
| Standard Deduction | ₹50,000 | ₹50,000 |
| Deductions (80C, 80D, etc.) | ₹2,00,000 | Not applicable |
| Taxable Income | ₹9,50,000 | ₹11,50,000 |
| Tax Payable (Approx.) | ₹1,12,500 | ₹97,500 |
Break-Even Analysis: How Much Deduction Do You Need?
To help you decide, here’s how much in deductions you would need in the Old Regime to match the tax paid under the New Regime:
| Gross Income (₹) | Tax (New Regime) | Deduction Needed (Old Regime) |
| 7,00,000 | Nil | Not applicable (New wins) |
| 9,00,000 | ₹45,000 | ~₹1,80,000 |
| 12,00,000 | ₹97,500 | ~₹2,50,000 |
| 15,00,000 | ₹1,50,000 | ~₹3,75,000 |
| 18,00,000 | ₹2,10,000 | ~₹4,50,000 |
If you can claim deductions above these break-even levels, the Old Regime will save you more tax.
When to Choose Which Regime?
Opt for the New Regime if:
- Your income is below ₹7 lakh.
- You don’t have significant tax-saving investments.
- You prefer a simplified return without documentation.
- You are a freelancer/gig worker without structured benefits.
Opt for the Old Regime if:
- You invest in 80C instruments like PPF, LIC, ELSS.
- You pay for health insurance (80D) or home loan (24b).
- Your employer provides HRA, LTA benefits.
- You have education loans, NPS contributions, or tuition fees.
How to Choose in ITR Filing?
| Taxpayer Type | Action Required |
| Salaried Individuals | Choose while filing ITR (option in ITR portal). |
| Business/Professionals | Must file Form 10-IEA before due date to opt in/out. |
Key Points to Remember
- New Regime is the default from FY 2024–25.
- You must opt out of it if you want to use the Old Regime.
- Switching between regimes is restricted for those with business/professional income.
- Always use the ITD calculator to compare both regimes: incometax.gov.in
Thoughts
There is no one-size-fits-all solution.
Your choice between Old and New Regime should depend on:
- Your income level
- Your available deductions
- Your investment strategy
- Your filing preference (simplicity vs optimization)
Even a small difference in deductions can lead to thousands of rupees saved or paid extra in tax.
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Author: CA. Ena Kansal, Apurv Kansal and Company, Chartered Accountants, Indore (The author is a Practicing Chartered Accountant and a renowned Trainer with an exposure in Audits, Direct & Indirect Taxes. Author can be reached at ena@apurvkansal.co.in)
Author Bio
Standard deduction 75000/- under new Regime