Old vs New Tax Regime: Making the Right Choice for FY 2024-25

Old vs New Tax Regime: Making the Right Choice for FY 2024-25

The Indian tax landscape has undergone significant changes in recent years, offering taxpayers the option to choose between the Old Tax Regime and the New Tax Regime. Understanding the differences between these regimes is crucial for effective tax planning.
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  1. Tax Slabs Comparison

Old Tax Regime (FY 2024-25)

Income Range (₹)

Tax Rate

Up to 2.5 lakh

Nil

2.5 lakh – 5 lakh

5%

5 lakh – 10 lakh

20%

Above 10 lakh

30%

Note: Taxpayers can claim various exemptions and deductions under this regime.

New Tax Regime (FY 2024-25)

Income Range (₹)

Tax Rate

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%

Note: This regime offers reduced tax rates but fewer exemptions and deductions.

  1. Key Differences between the Regimes:-

 

Deductions and Exemptions

  • Old Regime: Allows a wide range of deductions and exemptions, including:
    • Section 80C (up to ₹1.5 lakh)
    • Section 80D (health insurance premiums)
    • Section 24(b) (home loan interest)
    • House Rent Allowance (HRA)
    • Leave Travel Allowance (LTA)
  • New Regime: Offers limited deductions:
    • Standard Deduction of ₹75,000 for salaried individuals
    • Employer’s contribution to NPS under Section 80CCD(2)
    •  Note: The New Tax Regime does not allow deductions under Section 80C, Section 80D, or exemptions like HRA and LTA.

Tax Rebate Under Section 87A

  • Old Regime: Rebate of up to ₹12,500 for individuals with total income not exceeding ₹5 lakh.
  • New Regime: Rebate of up to ₹25,000 for individuals with total income not exceeding ₹7 lakh.
  1. Surcharge and Cess
  • Old Regime:
    • Surcharge Rates:
      • 0% for income up to ₹50 lakh
      • 10% for income between ₹50 lakh and ₹1 crore
      • 15% for income between ₹1 crore and ₹2 crore
      • 25% for income between ₹2 crore and ₹5 crore
      • 37% for income above ₹5 crore
    • Cess:
      • 4% on income tax payable.
  • New Regime:
    • Surcharge Rates:
      • 0% for income up to ₹50 lakh
      • 10% for income between ₹50 lakh and ₹1 crore
      • 15% for income between ₹1 crore and ₹2 crore
      • 25% for income between ₹2 crore and ₹5 crore
      • 30% for income above ₹5 crore
    • Cess:
      • 4% on income tax payable.
  1. Choosing the Right Regime

Factors to Consider:

  • Income Level: Individuals with income up to ₹7 lakh may benefit more from the New Tax Regime due to the higher rebate under Section 87A.
  • Deductions and Exemptions: If you have significant deductions under Section 80C, Section 80D, or claim HRA and LTA, the Old Regime may be more beneficial.
  • Simplicity: The New Tax Regime offers a simplified tax structure with reduced compliance requirements.
  • Tax Planning: The Old Regime allows for strategic tax planning through various exemptions and deductions.
  1. Recent Changes and Advisory

As per the latest advisory issued by the Income Tax Department, the New Tax Regime has become the default tax system starting from FY 2025-26. However, taxpayers have the option to opt for the Old Tax Regime if they wish to claim deductions and exemptions.

  1. Conclusion

Choosing between the Old and New Tax Regimes depends on individual financial circumstances. It’s advisable to assess your income, deductions, and exemptions to determine which regime offers the maximum tax benefit. Utilizing online tax calculators or consulting with a tax professional can aid in making an informed decision.

 

Note: The information provided is based on the latest available data as of May 2025. Tax laws are subject to change, and it’s advisable to consult the official guidelines or a tax professional for personalized advice.