Old and New Tax Regimes For FY 2024-25

March 15, 2025
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Which One Works Best for You?

The Indian tax system has always been a topic of discussion, particularly with the introduction of various tax regimes aimed at simplifying the process for taxpayers. For the Financial Year (FY) 2024-25, taxpayers have the option to choose between two tax regimes: the Old Tax Regime and the New Tax Regime. Both come with their own set of advantages and disadvantages, and it's important to understand how they differ to make an informed decision.

TAX RATE COMPARISON

Under Old and New Scheme

The New Regime is designed to reduce the tax burden by offering lower tax rates, but it comes with a trade-off-many exemptions and deductions available under the Old Regime have been reduced or eliminated. While the Old Regime provided more opportunities for taxpayers to reduce their taxable income through various exemptions and deductions, New Regime aims at simplifying the process by minimalizing compliances, though at the cost of fewer tax saving options.

Below is a concise comparison of the tax rates between New and Old Regimes.

Income Slabs	Old Regime	New Regime
Up to 250,000	Nil	Nil
₹250,001 to ₹300,000	5%	Nil
*300,001 to ₹500,000	5%	5%
₹500,001 to ₹700,000	20%	5%
₹700,001 to ₹10,00,000	20%	10%
₹10,00,001 to ₹12,00,000	30%	15%
12,00,001 to ₹15,00,000	30%	20%
Above 15 lakh	30%	30%

COMPARISON OF DEDUCTIONS TAX

Allowed Under the Old and New Tax Regimes for FY 2024-25

As mentioned earlier, the New Tax Regime offers fewer exemptions and deductions compared to the Old Regime. Below is a quick summary of the major deductions and exemptions, indicating whether they are allowed under each regime.

Deductions	Old Tax Regime	New Tax Regime
Section 80C (Investments in PPF, ELSS, Life Insurance, Payment of tuition fees etc.)	Allowed (up to 1.5 lakh)	Not Allowed
Sec 80CCD(1B) (Additional deduction up to Rs. 50,000 for Contribution to NPS)	Allowed	Not Allowed
Sec 80CCD(2) (Employer’s contribution to NPS scheme)	Allowed (subject to conditions)	Allowed (subject to conditions
Section 80D (Health Insurance Premium)	Allowed (deductions for self, family, and parents)	Not Allowed
Section 24(b) (Home Loan Interest)	Allowed(up to 2 lakh for self-occupied property)	Not Allowed
Section 10(13A) (House Rent Allowance – HRA)	Allowed (subject to conditions)	Not Allowed
Section 10(5) (Leave Travel Allowance – LTA	Allowed (subject to conditions)	Not Allowed
Section 80E (Interest on Education Loan)	Allowed (for education loan interest)	Not Allowed
Section 80G (Donations to Charity)	Allowed (subject to conditions)	Not Allowed
Section 80GGC (Political Contributions)	Allowed (for donations to political parties)	Not Allowed
Rebate under Section 87A	Allowed up to 12,500 (for income up to 25 lakh)	Allowed up to ₹25,000 (for income up to 77 lakh)
Standard deduction from Salary u/s 16	*50,000	₹75,000

TAX IMPACT COMPARISON

To simplify the difference between the two tax regimes by taking examples of taxable income and tax computation. We will compare the taxable income and tax liability under both the schemes in respect of low income, moderate income and high income. These examples will clearly illustrate how the tax rates and availability of deductions and exemptions in each regime affect the final tax liability. This comparison will help you better understand which tax regime works best for your financial situation.

Old Tax Regime

*For computation, Deduction under Chapter VIA 80C: Rs. 150,000; 80D: Rs. 25,000; 80CCD(1B): Rs. 50,000, have been assumed while computing tax.

New Tax Regime

Which Tax Regime Should You Choose?

The decision to opt for the Old or New Tax Regime largely depends on your individual financial situation. Here are some scenarios that can help guide your decision:

1. If you have significant tax-saving investments: If you invest in tax-saving instruments like PPF, ELSS, or have significant deductions (e.g., home loan interest), the Old Tax Regime might be more beneficial.

2. If you prefer a simplified process: If you do not have many tax-saving investments or exemptions and prefer a simpler process, the New Tax Regime is a great option, given lowered rates.

3. For high earning individuals: The Old Tax Regime may be preferable for those who benefit from deductions and exemptions. However, for individuals who do not utilize tax-saving tools, the New Tax Regime may offer a lower tax outlay.

Conclusion

The Old Tax Regime offers more options for reducing tax liability through deductions and exemptions but can be more complicated. The New Tax Regime offers simplicity and lower tax rates, but sacrifices deductions. It's important to calculate your potential tax liability under both regimes based on your income and expenses to make informed decision for FY 2024-25.

It's always a good idea to consult with a Chartered Accountant to identify the tax regime that aligns with your financial goals and maximizes your savings.