Choosing between New Tax Regime and Old Tax Regime can save you thousands in income tax. With Budget 2024 changes, the new regime is now the default. Here is a detailed comparison to help you decide.
New Tax Regime — FY 2025-26 Slabs
- Up to Rs 3 lakh: NIL
- Rs 3-7 lakh: 5%
- Rs 7-10 lakh: 10%
- Rs 10-12 lakh: 15%
- Rs 12-15 lakh: 20%
- Above Rs 15 lakh: 30%
- Standard deduction: Rs 75,000 (salaried)
- Rebate u/s 87A: Up to Rs 25,000 if income up to Rs 7 lakh
Old Tax Regime — FY 2025-26 Slabs
- Up to Rs 2.5 lakh: NIL
- Rs 2.5-5 lakh: 5%
- Rs 5-10 lakh: 20%
- Above Rs 10 lakh: 30%
- Standard deduction: Rs 50,000 (salaried)
- Rebate u/s 87A: Up to Rs 12,500 if income up to Rs 5 lakh
Key Deductions Available Only in Old Regime
- Section 80C: Rs 1.5 lakh (PPF, ELSS, LIC, home loan principal)
- Section 80D: Health insurance premium up to Rs 50,000
- HRA exemption (House Rent Allowance)
- LTA (Leave Travel Allowance)
- Section 80E: Education loan interest
- Section 24: Home loan interest up to Rs 2 lakh
- Section 80G: Donations to charitable trusts
- Section 80TTA/80TTB: Savings interest deduction
Deductions Allowed in New Regime
- Standard deduction Rs 75,000 (salaried only)
- Employer NPS contribution (Section 80CCD(2))
- Transport allowance for disabled employees
- Conveyance allowance for official duties
- Family pension deduction (1/3 or Rs 25,000)
Income-wise Comparison
- Income Rs 7.5 lakh: Both regimes give NIL tax (with deductions in old regime)
- Income Rs 10 lakh with Rs 1.5L 80C: Old regime saves more
- Income Rs 12 lakh with NO deductions: New regime saves more
- Income Rs 15 lakh with Rs 3L deductions: Old regime saves more
- Income above Rs 15 lakh with high deductions: Old regime usually better
Who Should Choose New Regime?
- Young professionals with low investments
- People without home loan or HRA benefit
- Those who do not invest in 80C instruments
- Anyone wanting simple tax filing
- High earners without deductions
Who Should Choose Old Regime?
- Home loan borrowers (interest deduction)
- HRA receivers paying high rent
- Those with health insurance premiums
- PPF/ELSS/insurance investors
- People supporting parents (80D, 80DDB)
How to Switch Between Regimes
Salaried employees can switch every year while filing ITR. Business/professional income earners can opt out of new regime only once – then must continue till business ceases.
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