Here’s a detailed comparison between the New Tax Regime and the Old Tax Regime under the Income-tax Act, 1961, for FY 2024-25 (AY 2025-26):
1. Tax Slab Comparison
📌 Old Regime (with deductions & exemptions)
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 – 2.5 lakh | 0% |
| 2.5 – 5 lakh | 5% |
| 5 – 10 lakh | 20% |
| Above 10 lakh | 30% |
✅ Allows most exemptions/deductions, including:
- Standard Deduction (₹50,000)
- HRA, LTA
- 80C (LIC, PPF, ELSS – up to ₹1.5 lakh)
- 80D (Medical insurance)
- 80E, 80G, 80TTA, etc.
New Regime (default option from FY 2023-24)
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 – 3 lakh | 0% |
| 3 – 6 lakh | 5% |
| 6 – 9 lakh | 10% |
| 9 – 12 lakh | 15% |
| 12 – 15 lakh | 20% |
| Above 15 lakh | 30% |
✅ Key features:
- Standard deduction of ₹50,000 now allowed (since Budget 2023)
- Rebate under Section 87A up to ₹7 lakh total income = zero tax
- No exemptions like HRA, 80C, 80D, LTA, etc.
- Lower tax rates, but fewer deductions
2. Which Regime is Better?
| Scenario | Recommended Regime |
|---|---|
| No investments, few deductions | ✅ New Regime |
| Salaried with high HRA, 80C, 80D claims | ✅ Old Regime |
| Income < ₹7 lakh | ✅ New Regime (0 tax) |
| Home loan or housing rent benefits | ✅ Old Regime |
| Freelancers with no exemptions | ✅ New Regime |
3. Section 87A Rebate
| Total Taxable Income | Rebate (Old Regime) | Rebate (New Regime) |
|---|---|---|
| Up to ₹5 lakh | ₹12,500 | ₹12,500 |
| Up to ₹7 lakh | ❌ | ₹25,000 |
So under the new regime, total income up to ₹7 lakh = zero tax after rebate.
4. Opt-In & Switch Rules
- Salaried Individuals: Can choose every year while filing return.
- Business Income: Must opt once, then stay locked unless business ceases.
Final Tip:
You can use both tax regimes to compute and choose the lower tax option every year (if salaried)
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