Old Tax Regime or New? Which one to choose for whom?
A new tax regime comes with more slabs and a lower tax rate, but no way to reduce taxable income. However, the old tax regime allows you to claim deductions and exemptions of various natures to reduce the tax. But the only challenge is to optimise your investments every year to bring down your taxable income. Hence, choosing between the old tax regime and the new tax regime is quite complex. Before deciding on which structure to choose, let’s take a look at the exemptions and deductions that were allowed in the old tax regime, which you have to forgo in the new tax regime. This will help to plan the taxes accordingly and choose between the old and new tax structures.
| Income slabs under the Old Tax Regime | Tax Rates |
| Up to ₹ 2,50,000 | 5% |
| ₹ 2,50,001 - ₹ 5,00,000 | 10% |
| ₹ 5,00,001 - ₹ 10,00,000 | 20% |
| Above ₹ 10,00,000 | 30% |
Tax rates applicable under the New Tax Regime (As per Budget 2025)
| Income slabs under the New Tax Regime | Tax Rates |
| Up to ₹ 3,00,000 | Nil |
| ₹ 3,00,001 - ₹ 7,00,000 | 5% above ₹ 3,00,000 |
| ₹ 7,00,001 - ₹ 10,00,000 |
₹ 20,000 + 10% above ₹ 7,00,000 |
| ₹ 10,00,001 - ₹ 12,00,000 | ₹ 50,000 + 15% above ₹ 10,00,000 |
| ₹ 12,00,001 - ₹ 15,00,000 | ₹ 80,000 + 20% above ₹ 12,00,000 |
| Above ₹ 15,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 |
Exemptions and Deductions not Claimable under the New Tax Regime
- Leave travel allowance (LTA)
- Standard deduction on salaries
- Professional tax as well as an allowance for entertainment
- House rent allowance (HRA)
- Interest on savings account
- Interest on senior citizen deposits
- Interest paid on a home loan on a vacant or a self-occupied property
- Family pensions
- Special allowances
- Contribution to various investments such as Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), Employee Provident Fund (EPF) and NSC, etc.
- Contribution to the National Pension Scheme (NPS)
- Health Insurance Premium (self and family)
- Interest on education loan
- Interest on a home loan, etc
Most of the deductions available under Chapter VI-A of the Income Tax Act (such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE, 80G and 80GGA, etc) are not claimable under the new concessional income tax regime. Deductions allowed for employer contribution towards NPS and for new employment (80JJAA) are claimable under the new tax regime.
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