Old v/s New Tax Regime: Which one should you choose?
The Indian Taxation system has been evolving steadily over the past few years. Recently, the most significant change in the tax system can be seen in the Financial Year 2025-2026, when the Indian government introduced a New Tax Regime. This new tax regime aims to provide relief to taxpayers and stimulate growth in the economy. However, taxpayers often get perplexed between the Old and the New Tax Regime and this article highlights the benefits and differences in the old v/s new tax regime.
So, in order to overcome this dilemma of choosing the correct tax regime. It’s really important to understand the key differences between the Old and New Tax Regimes. Apart from this, it is also necessary to analyse which regime can turn out to be profitable for which category of taxpayers.
Old Tax Regime
The taxpayers have preferred the Old Tax Regime for a really long time. This tax regime has its own set of benefits. It is a well-established, time-tested regime which offers a reliable framework for taxpayers to claim deductions and exemptions.
The slabs of the Old Tax Regime are as follows
For individuals below 60 years of age
Income upto Rs. 2.5 lakh = No Tax
Income upto Rs. 2.5- Rs.5 lakh = 5% Tax
Income upto Rs. 5-10 lakh = 20% Tax
Income above Rs. 10 lakh = 30%
For Senior Citizens (60 to 80 Years)
Income up to ₹3,00,000: No tax
Income from ₹3,00,001 to ₹5,00,000: 5% of income exceeding ₹3,00,000
Income from ₹5,00,001 to ₹10,00,000: ₹10,000 plus 20% of income exceeding ₹5,00,000
Income above ₹10,00,000: ₹1,10,000 plus 30% of income exceeding ₹10,00,000
For Super Senior Citizens (Above 80 Years)
Income up to ₹5,00,000: No tax
Income from ₹5,00,001 to ₹10,00,000: 20% of income exceeding ₹5,00,000
Income above ₹10,00,000: ₹1,00,000 plus 30% of income exceeding ₹10,00,000.
Benefits of Old Tax Regime
The Old Tax Regime provides various deductions and exemptions to taxpayers. Section 80C allows deductions for investments in instruments such as the Public Provident Fund, Equity Linked Savings Scheme, Life Insurance policies and more upto Rs. 1.5 lakh. There are several deductions on health insurance policies for self and family.
Individuals who are paying home loans are often advised to opt for the Old Tax Regime because through this, they can get a deduction of upto Rs. 2 lakh on interest paid on home loans. Exemptions and relief on House Rent Allowance or HRA can also be claimed.
For salaried employees, who have to carry often the burden of paying taxes. The Old Tax Regime provides great benefits to them by giving a heavy deduction of Rs. 50,000.
Apart from this, the Old Tax Regime provides various other deductions to the taxpayers on Educational loans, health expenses, charitable activities, disability-related instruments and so on.
New Tax Regime
According to the New Tax Regime which is revised and presented in the Union Budget 2025. The Taxation slabs are as follows
Up to ₹4,00,000:- No tax
₹4,00,001 to ₹8,00,000:- 5%
₹8,00,001 to ₹12,00,000:- 10%
₹12,00,001 to ₹16,00,000:- 15%
₹16,00,001 to ₹20,00,000:- 20%
₹20,00,001 to ₹24,00,000:- 25%
Above ₹24,00,000:- 30%
The revised tax slabs of the New Tax Regime highlight the fact the government is promoting the New Tax Regime. They want a large-scale transition of the taxpayers from the Old to the New Tax Regime.
Benefits of the New Tax Regime
This time, the government has vigilantly increased rebates. The rebate under Section 87A has been enhanced from Rs. 12,500(for income upto ₹7,00,000) to Rs. 60,000 (for income upto ₹12,00,000). It also means that for individuals who earn upto Rs. 12,00,000 or less, they don’t have to pay any tax under the New Regime because the rebate covers the entire tax liability.
A Standard deduction of Rs. 75,000 is now available for salaried employees, which is quite higher than Rs. 50,000, which is deducted in the Old Regime.
Get Started with TaxDunia
Hence, both regimes have their own merits and demerits. For taxpayers who enjoy various deductions such as PPF, ELSS, home insurance, and so on, they should opt for The Old Tax Regime. However, for salaried employees, the New Tax Regime is advantageous as compared to the Old Tax Regime. Get started with TaxDunia to know which tax regime you must choose for optimum results. Our team of professionals offers personalized solutions to your unique needs.
