With the new financial year in full swing, taxpayers are once again faced with the choice: Old Tax Regime or New Tax Regime? The government has continued to push the simplified New Regime, but is it always the better option?
| Income Slab | Tax Rate |
|---|---|
| ₹0 – ₹3,00,000 | 0% |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Rebate: Under Section 87A, individuals with total income up to ₹7 lakh get a full tax rebate. So, no tax is payable even if taxable income falls into the 5% or 10% slab.
Standard deduction limit under the New Tax Regime from ₹ 50,000 to ₹ 75,000 for the AY 2025-26 (FY 2024-25).
| Income Slab | Tax Rate |
|---|---|
| ₹0 – ₹2,50,000 | 0% |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Rebate: Up to ₹5 lakh income (₹12,500 max).
Deductions allowed: Standard Deduction (₹50,000), 80C, 80D, HRA, LTA, and more.
The New Regime does not allow popular deductions such as 80C, HRA, and home loan interest. However, it includes:
Old Tax Regime:
- Income: ₹8,00,000
- Standard Deduction: ₹50,000
- Taxable Income: ₹7,50,000
- Tax: ₹12,500 (5% of ₹2.5L) + ₹50,000 (20% of ₹2.5L) = ₹62,500
- Section 87A rebate not available (income > ₹5L)
- Interest u/s 234A/B/C follows.
New Tax Regime (Based on actual computation):
- Income: ₹8,00,000
- Standard Deduction: ₹75,000 → Taxable Income = ₹7,25,000
- Tax: ₹15,000 (5% of ₹3L) + ₹7,500 (10% of ₹0.75L) = ₹22,500
- Health & Education Cess (4%) = ₹900
- Basic Tax Payable: ₹23,400
- Interest u/s 234A/B/C follows.
- Section 87A rebate not available (income > ₹7L)
Conclusion:
New Regime results in tax of ₹23,400 versus ₹62,500 (Old Regime) → New Regime is better.
| Taxpayer Type | Better Regime |
|---|---|
| Salaried, no major investments | New Regime |
| Salaried with HRA + 80C + 80D | Old Regime |
| Business owner with minimal expenses | New Regime |
| High-salaried with home loan & NPS | Old Regime |
If your deductions are less than ₹3.5 lakh, the New Regime is usually better. Otherwise, explore the benefits of the Old Regime.
Still unsure? Try a tax calculator or consult a professional before you file.