Old Tax Regime Vs New Tax Regime: When it comes to choosing between the old and new tax regimes in India, many salaried individuals are left confused. Which option helps save more tax? Should you let go of exemptions or stick with deductions? According to Amit Goel, a Chartered Accountant from New Delhi, the right answer depends on your income level, investment habits, and personal financial goals. Let’s break it down in simple terms:
Understanding The Old And New Tax Regimes
Old Tax Regime:
Under this regime, taxpayers can claim various deductions and exemptions such as Section 80C (investments in PPF, ELSS, LIC), 80D (health insurance), HRA (House Rent Allowance), LTA (Leave Travel Allowance), and more. The tax slabs are slightly higher, but the deductions often reduce the taxable income significantly.
New Tax Regime:
The new regime offers lower tax slabs but removes most deductions and exemptions. It simplifies tax filing and is beneficial for those who do not invest in tax-saving instruments or claim major exemptions.
Union Budget 2025 Tax Slabs Key Highlights
CA Amit Goel says, “The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman introduced some major changes which include substantial income tax cuts, with the basic exemption limit and more:”
i) Zero Tax Up to ₹12.75 Lakh (Salaried Under New Regime)
ii) Under the new tax regime, income up to ₹12 lakh is tax-free for everyone.
iii) Salaried individuals also get a ₹75,000 standard deduction, making total income up to ₹12.75 lakh completely tax-free.
iv) New Income Tax Slab Rates
- 0%: Up to ₹4 lakh
- 5%: ₹4 – 8 lakh
- 10%: ₹8 – 12 lakh
- 15%: ₹12 – 16 lakh
- 20%: ₹16 – 20 lakh
- 25%: ₹20 – 24 lakh
- 30%: Above ₹24 lakh
v) Old Income Tax Slabs Unchanged (The old tax regime continues with its standard slabs)
- 0% up to ₹2.5 lakh
- 5% from ₹2.5 lakh to ₹5 lakh
- 20% from ₹5 lakh to ₹10 lakh
- 30% above ₹10 lakh
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Who Benefits Most From The Old Tax Regime?
CA Amit Goel shared, “If you can claim significant deductions for example, ₹5 to 8 lakh or more through HRA, 80C, 80D, and home loan interest, then the old regime may reduce your taxable income enough to offset the higher tax rates.”
Who Benefits Most From The New Tax Regime?
CA Amit Goel suggests, “Salaried individuals up to ₹12.75 lakh who want a zero-tax liability. People who cannot (or prefer not to) invest large sums in instruments like PPF, ELSS, or insurance solely to save tax. High-income earners whose total deductions (excluding the standard deduction) are relatively modest especially if under ₹8 lakh in the old regime.”
Under the new tax regime, apart from the standard deduction for salaried individuals, most of the commonly used exemptions and deductions like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and popular sections such as 80C (for investments) and 80D (for health insurance) are not allowed.
CA Amit Goel recommends, “The best approach is to itemise your allowable deductions and exemptions carefully under the old regime, compare that final taxable figure and tax outgo with the new regime, and then choose the option that leads to maximum net savings.”
Whether the old or new regime works better for you really depends on the number and value of deductions you're eligible to claim. If you typically make use of multiple tax-saving options, the old regime might help you save more. But if you don’t claim many deductions, the new regime could be more beneficial.
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