Choosing between the Old Tax Regime vs New Tax Regime is like picking between a customized buffet and a quick meal deal. Each has its benefits, depending on your income, financial habits, and life goals. In this article, we’ll break down both systems so you can decide which one suits you best.
If you’re looking for expert assistance to navigate these changes, FilingIn offers personalized tax planning and seamless ITR filing services designed to meet your specific needs.
What Is the Old Tax Regime?
The old tax regime gives you the power of deductions and exemptions. It’s perfect for those who love saving, investing, and tax planning. Some key features include:
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Section 80C: Deduction up to ₹1.5 lakhs for investments like PPF, ELSS, LIC
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HRA: House Rent Allowance deduction
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LTA: Leave Travel Allowance
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Section 80D: Deduction for health insurance premiums
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Home Loan Interest: Interest on housing loans is deductible
Old Tax Regime vs New Tax Regime tip: The old regime favors disciplined savers and tax planners.
What Is the New Tax Regime?
The new tax regime is all about simplicity. It offers lower tax slabs but very few deductions. Think of it as a straightforward, no-frills plan. Key highlights:
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Lower tax rates across slabs
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Standard Deduction of ₹75,000 (as of FY 2025-26)
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Employer NPS contribution is still allowed
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Section 87A rebate for income up to ₹12 lakhs
Old Tax Regime vs New Tax Regime insight: If you’re not claiming major deductions, the new regime is usually more tax-efficient.
Section 87A – A Major Decider
Under Section 87A, taxpayers with net taxable income up to ₹12 lakhs can avail a rebate of ₹60,000, making their tax liability zero under the new regime.
This is a game-changer in the Old Tax Regime vs New Tax Regime debate—especially for middle-income earners.
Scenario-Based Tax Planning
Scenario 1: Income Below ₹12 Lakhs
New regime advantage:
- ₹75,000 standard deduction
- Section 87A rebate
- Net tax: Zero
Old regime? Only better if you’ve maxed out deductions.
Scenario 2: Income Between ₹12 Lakhs – ₹24 Lakhs
New regime wins if:
- You don’t have many deductions
- Prefer simplicity
Old regime saves more if:
- You invest in ELSS, PPF, LIC
- You claim home loan interest and HRA
Scenario 3: Income Above ₹24 Lakhs
Old regime may win if:
- You claim ₹4–5 lakhs in total deductions
- You own a home, invest heavily, or pay rent
New regime shines if:
- You don’t want to manage documents and paperwork
Old Tax Regime vs New Tax Regime: Key Differences
| Feature | Old Regime | New Regime |
|---|---|---|
| Section 80C, 80D | ✅ | ❌ |
| HRA, LTA | ✅ | ❌ |
| Standard Deduction | ✅ | ✅ |
| NPS Employer Contribution | ✅ | ✅ |
| Section 87A | ✅ | ✅ (Enhanced Limit) |
Tax Calculation Examples
Example 1: ₹11.9 Lakhs Income
New Regime
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Standard deduction: ₹75,000
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Section 87A applies
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Final Tax: ₹0
Example 2: ₹18 Lakhs Income
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No deductions? New regime likely better
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Maxed 80C, 80D? Old regime saves more
Example 3: ₹25 Lakhs Income
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Deduction claims above ₹4L? Old regime saves more
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No deductions? New regime is simpler
Tools to Compare Old Tax Regime vs New Tax Regime
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Income Tax Calculators on government or financial websites
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Employer Salary Portals for regime declaration
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Consulting a CA for personalized advice
Common Mistakes to Avoid
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Forgetting the ₹75,000 standard deduction in the new regime
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Overestimating your ability to claim deductions in the old regime
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Not comparing both regimes before declaring to your employer
When Should You Switch Regimes?
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Bought a house? Check the old regime.
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No investments? The new regime might be better.
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Got a big salary hike? Recalculate using tax calculators.
How to Declare Your Tax Regime
Every April, your employer will ask for your regime choice for TDS. You can switch regimes while filing your ITR later, but early planning helps reduce TDS and surprises.
Final Thoughts on Old Tax Regime vs New Tax Regime
The new tax regime is attractive for those who want ease, zero tax up to ₹12 lakhs, and minimal investment commitments. On the other hand, the old tax regime still rewards those who plan, save, and invest strategically.
FAQs
Can I switch between regimes every year?
Yes, salaried individuals can change regimes each financial year during ITR filing.
Is the standard deduction allowed in the new regime?
Yes, ₹75,000 is now included (FY 2025–26).
Does Section 87A apply to both regimes?
Yes, but it’s more beneficial in the new regime (up to ₹12 lakhs income).
What if I declared the wrong regime to my employer?
You can correct it while filing your Income Tax Return.
Should I consult a tax expert?
Yes, especially if your income exceeds ₹20 lakhs or involves multiple sources.
