Difference Between Old and New Tax Regimes for FY 2024-25 (AY 2025-26)
The Indian Government levies income tax on taxpayers depending on their income level. It is applicable when the income of taxpayers exceeds the basic exemption limit. However, our Government has revised the new income tax regime from the financial year 2024-25 and has declared it the default tax regime since April 1, 2023.
With the new income tax regime comes the confusion of which one to choose. The new regime is beneficial for some, and for some, the old one. Therefore, you must know everything about the old regime vs new regime.
What are the Tax Rates in the New and Old Income Tax Regime?
The Union Government introduced new income tax slabs in the 2020 budget. The payable tax amounts in these slabs are lower than in the old tax slabs.
Nevertheless, this new tax regime removes some deductions and exemptions. Let’s compare the old and new tax regimes here.
Old vs. New Income Tax Slab Rates - FY 2024-25 (AY 2025-26)
The Union Budget of 2024 changed the new tax regime starting FY 2024-25. So, here are the updated old vs new tax slab rates.
Income Tax Slabs For Individuals and HUF
Below is a table to elaborate on the old tax regime vs new tax regime for people below 60 and HUFs:
Income Tax Slab For Senior Citizens
The following table shows the new regime vs old regime slab rates for individuals aged above 60 years to 80 years.
Income Tax Slab For Super Senior Citizens
The table below shows the new tax regime vs old tax regime slab rates for individuals aged 80 and above.
Exemptions and Deductions in Old and New Income Tax Regimes
The meaning of “exemption” is that a taxpayer is unbound to pay tax up to a certain income level. At the same time, “Deduction” means debiting certain investments and expenses from a taxpayer’s income to calculate the taxable income.
These exemptions and deductions are not identical in new and old income tax regimes. The existing or old tax regime had 120 exemptions and deductions, most of which complicated the tax calculation. Therefore, the Ministry of Finance repealed 70, keeping 50 available.
The table below shows the comparison of exemptions available in the new tax regime and in the old tax regime for both FY 2023-24 and FY 2024-25:
Which is Better Old or New Tax Regime?
If you’re wondering, ‘Is the new tax regime better than the old?’ Then here’s a simplified old vs. new tax regime comparison done for you below.
Pros and Cons of Old Tax Regime
Pros and Cons of New Tax Regime
How to Choose Between the New and Old Income Tax Regime?
Taxpayers often wonder how to choose between old and new tax regimes. You must calculate your payable tax in both regimes to determine which is more beneficial. Below are some scenarios of individuals with different incomes and investments. The calculations compare new and old income tax slabs for FY 2024-25 for a particular income.
Scenario 1:
- Annual income = ₹8,00,000
- The expense for Life Insurance premiums (per annum) = ₹35,000
- Contribution towards EPF (per annum) = ₹25,000
Here’s how to calculate the net taxable income as per both regimes based on the given numbers for FY 2024-25:
Calculation of Net Taxable Income - FY 2024-25 (AY 2025-26)
Income Tax Calculation (Old vs. New Income Tax Regime) - FY 2024-25
Now, let us calculate the income tax for both regimes:
In this scenario, choosing the new regime is a wise decision for the taxpayer.
The following scenario shows the new versus old tax regime slab rate if the annual income is above ₹15 lakhs.
Scenario 2:
- Annual income = ₹18,00,000
- Expense for Life Insurance premiums (per annum) = ₹75,000
- Contribution towards EPF (per annum) = ₹25,000
Here’s how to calculate the net taxable income as per both regimes if your income is above ₹15 lakhs:
Calculation of Net Taxable Income - FY 2024-25
Income Tax Calculation (Old Regime vs New Regime) - FY 2024-25
Now, let us calculate the income tax for both regimes:
In this scenario, the old regime becomes more beneficial for the taxpayer.
Thus, here is a final breakdown of calculations to help you choose the right income tax regime for FY 2024-25:
- Choose the new tax regime if your total deductions are ₹1.5 lakhs or less.
- Choose the old tax regime if your total deductions are more than ₹3.75 lakhs.
- If your total deductions are between ₹1.5lakhs and ₹3.75 lakhs, choose the tax regime depending on your income level.
Hence, you must consider all your deductions and exemptions before choosing between old and new income tax. After all exemptions and deductions under the old regime, calculate the net taxable amount. If it is lower than the amount under the new regime, choosing the old one is wise, and vice versa.
FAQs about Old vs New Income Tax Slabs for FY 2024-25
Can I claim an 80C deduction and opt for the new tax regime?
No, you cannot claim any deduction under Section 80C while opting for the new income tax regime. The Indian Government has removed almost 70 exemptions and deductions, including Section 80C.
What is the difference between old and new tax regimes?
The old and new tax regimes have different tax slabs and rates. The old regime allows various deductions and exemptions, while the new regime offers lower tax rates but fewer deductions and exemptions.
Which is better, old or new tax regime?
The best choice depends on your personal situation. You should compare the old versus new tax regime to see which is better for you. You can use our online Income Tax Calculator to compare your tax liabilities under both regimes.
My salary is ₹10 lakhs. Which tax regime is better for me?
If you have an income of ₹10 lakhs with tax savings deductions, other than standard deductions, of over ₹2,62,500, you should choose the old tax regime. However, if you do not have much tax-saving investments, then the new regime is better for you.
Who introduced the new IT regime in India, and when?
The Union Government of India introduced a new IT regime in the Budget 2020 for the financial year 2020-21 and revised the new tax slabs again in Budget 2024.
Can I claim a standard deduction of ₹50,000 in the new tax regime?
Yes, you can claim a standard deduction under both the tax regimes. However, after Budget 2024 you can now claim a standard deduction of ₹75,000 or the amount of salary, whichever is lower from FY 2024-25 onwards.
Is the new income tax regime optional?
No, the new income tax regime is proposed as the default tax regime, applicable from April 1, 2023.
Can I claim a deduction on the interest on borrowed capital for self-occupied property under the new tax regime?
No, under the new tax regime, you cannot claim a deduction for the interest on borrowed capital for a self-occupied property under Income from House Property. To claim this deduction, you must choose the old tax regime.
What tax benefits are available for senior citizens in the new tax regime?
The new tax regime has no specific advantage for senior citizens, but no tax is payable on total income up to ₹7,00,000. However, in the old tax regime, senior citizens have a higher basic exemption limit (₹3,00,000 for senior citizens and ₹5,00,000 for super senior citizens).
How much is the tax rebate under section 87a in the old vs. new tax regime?
In the old tax regime, an individual with a total income of up to ₹5,00,000 is eligible for a rebate of 100% of the income tax, up to a maximum of ₹12,500. However, under the new tax regime, this rebate is increased to ₹7,00,000, up to a maximum of ₹25,000.
Can I switch between the old and new income tax regimes in a financial year?
According to income tax laws, salaried taxpayers can opt for the old tax regime when filing their Income Tax Return (ITR) in a financial year. However, individuals with business income cannot change the tax regime once they have chosen at the beginning of the financial year.
Can a salaried employee claim an HRA exemption in the new regime?
No, you cannot claim a deduction for House Rent Allowance (HRA) in the new tax regime as it is unavailable. This deduction is only available in the old tax regime.
Do employees need to inform employers about their chosen tax regime?
Yes, you must tell your employer which tax regime you want to choose. If you don't declare that you want to choose the old regime, they will deduct your taxes based on the new regime's rates, as it is the default regime.