Old vs New Tax Regime (FY 2024–25 )

Old vs New Tax Regime in India: FY 2024–25 (AY 2025–26)

The Indian tax system for FY 2024–25 offers two choices: the traditional Old Tax Regime (with deductions and exemptions) or the simplified New Tax Regime (lower rates but fewer breaks). The Finance Act 2023 made the New Regime the default from AY 2024–25 onwards. Under the Old Regime, taxpayers can claim many tax breaks (like 80C, 80D, HRA, etc.), whereas the New Regime provides lower slab rates but only limited deductions. Which works best depends on your income and investments.

Income Tax Slabs Comparison

Taxpayer Group	Old Regime Slabs (FY24-25)	New Regime Slabs (FY24-25)
Up to ₹2.5 lakh	Nil	Up to ₹3 lakh Nil
₹2.5 – ₹5 lakh	5% on excess over ₹2.5L
₹5 – ₹10 lakh	20% on excess over ₹5L	₹3–7 lakh: 5%; ₹7–10 lakh: 10%
₹10 – ₹15 lakh	30% on excess over ₹10L	₹10–12 lakh: 15%; ₹12–15 lakh: 20%
Above ₹15 lakh	30%	Above ₹15 lakh: 30%

Note: All rates above exclude 4% cess and applicable surcharge (for high incomes). The Old Regime slabs vary slightly for seniors (60+ & 80+), with higher basic exemptions. No changes were made to Old Regime slabs in Budget 2024, so the above table applies. In contrast, the New Regime (default from AY2024-25) introduced more progressive slabs starting at ₹3 lakh.

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Tax Regime Comparison

✅ Key Exemptions and Deductions in the Old Tax Regime

🔹 Section 80C (Up to ₹1.5 lakh)

• EPF (Employee Provident Fund)
• PPF (Public Provident Fund)
• Life insurance premiums (for self, spouse, children)
• ELSS (Equity Linked Saving Scheme)
• Principal repayment on home loan
• Sukanya Samriddhi Yojana
• 5-year tax-saving FD
• NSC (National Savings Certificate)
• Tuition fees for up to 2 children

🔹 Section 80CCD(1B) (Up to ₹50,000)

• Additional deduction for investment in NPS
• Over and above 80C

🔹 Section 80D – Medical Insurance

• ₹25,000 for self + family (below 60 years)
• ₹50,000 for senior citizens
• Up to ₹75,000 or ₹1,00,000 (if both self and parents are senior citizens)

🔹 Section 24(b) – Home Loan Interest

• Up to ₹2 lakh (self-occupied property)

🔹 HRA – House Rent Allowance

House Rent Allowance (HRA) is a common component of many salary packages, but not all of it is exempt from tax. To determine how much of your HRA you can actually claim as a tax exemption under Section 10(13A) of the Income Tax Act, the exempt amount is the lowest of the following:

• Actual HRA received from your employer
• 50% of [Basic Salary + DA] (or 40% for non-metro cities)
• Rent paid minus 10% of [Basic Salary + DA]

🔹 Standard Deduction

Flat ₹50,000 from salary or pension

🔹 Section 80E – Education Loan Interest

No limit; available for up to 8 years

🔹 Section 80TTA / 80TTB – Savings Interest

• 80TTA: Up to ₹10,000 (non-senior citizens)
• 80TTB: Up to ₹50,000 (senior citizens)

🔹 Section 80G – Donations

50% or 100% deduction depending on the institution (eligible orgs only)

🔹 Leave Travel Allowance (LTA)

Exempt for domestic travel (2 trips in 4-year block)

🔹 Children’s Education & Hostel Allowance

• Education Allowance: ₹100/month per child (max 2) = ₹2,400/year
• Hostel Allowance: ₹300/month per child (max 2) = ₹7,200/year

🔹 Professional Tax

Deductible from gross salary

💡 Example of Maximum Common Deductions

Section	Description	Maximum Deduction
80C	PPF, ELSS, LIC, etc.	₹1,50,000
80CCD(1B)	NPS (additional)	₹50,000
80D	Health Insurance	₹75,000
24(b)	Home Loan Interest	₹2,00,000
Standard Deduction	Salary/Pension	₹50,000
Commonly Claimed Total		₹5.25 lakh

✅ New Tax Regime – Deductions & Exemptions (FY 2024–25)

🔹 Allowed Deductions

Section	Description	Maximum Deduction
Standard Deduction	For salaried individuals and pensioners	₹50,000
80CCD(2)	Employer’s NPS contribution	10% of salary (14% govt)
80CCH	Agnipath Scheme	Full contribution
80JJAA	New employment deduction (businesses)	As per conditions
Transport Allowance	For specially-abled employees	As applicable
10(10C)	VRS Exemption	Up to ₹5,00,000
10(10)	Gratuity	Up to ₹20,00,000
10(10AA)	Leave Encashment	Up to ₹3,00,000 (non-govt)
10(10A)	Commuted Pension	As applicable
10(10B)	Retrenchment Compensation	Up to ₹5,00,000

❌ Not Allowed in New Regime

• Leave Travel Allowance (LTA)
• House Rent Allowance (HRA)
• Section 80C (PPF, ELSS, LIC, etc.)
• Section 80D (Medical Insurance)
• Section 80CCD(1B) – NPS (employee)
• Section 24(b) – Home Loan Interest

🧾 Summary: Old vs New Regime

Category	Old Regime	New Regime
Standard Deduction	✅ Allowed	✅ Allowed
80C (PPF, ELSS, etc.)	✅ Allowed	❌ Not Allowed
80D (Medical Insurance)	✅ Allowed	❌ Not Allowed
80CCD(1B) – NPS	✅ Allowed	❌ Not Allowed
80CCD(2) – Employer NPS	✅ Allowed	✅ Allowed
Home Loan Interest (24b)	✅ Allowed	❌ Not Allowed
HRA	✅ Allowed	❌ Not Allowed

Tax Calculator

Compare your tax under Old vs New Regime for FY 2024–25

Gross Annual Income (INR): Age Group: Less than 60 60 to 80 years Above 80 years 80C (Max 1,50,000): 80CCD(1B) – NPS (Max 50,000): 80D (Health Insurance, ₹ max 25k/50k for senior): 80E (Education Loan Interest, no max limit): 80TTA/80TTB (Savings Interest, ₹ max 10,000/50,000): 80G – Donations (Max 1,00,000): Section 24(b) – Home Loan Interest (Max 2,00,000): HRA Exemption: Leave Travel Allowance (Max 50,000): Children Education + Hostel Allowance (Max 9,600): Professional Tax (Max 2,500): Standard Deduction (INR 50,000):

Pros and Cons of Each Regime

Old Tax Regime (With Exemptions)

• Pros: Allows up to ~70+ deductions/exemptions (80C, 80D, HRA, LTA, etc.), which can drastically reduce tax if you invest/shell out on these items.
• Cons: Higher tax rates in slab structure; more complex filing (need proof of investments/expenses). No benefit of larger rebate beyond ₹5L (under 87A).

New Tax Regime (Lower Rates)

• Pros: Lower slab rates for most brackets; simpler compliance (no need to track most exemptions). No tax on first ₹3 lakh of income. Effective rebate (87A) can nullify tax up to ₹5 lakh.
• Cons: Must forgo popular deductions (80C, 80D, HRA, etc.), so if you have significant investments or home loan interest, total tax may be higher.

Which Regime is Better? (Use-Case Scenarios)

Generally, Old Regime is preferable if you have large investments and expenses that qualify for deductions (e.g. you save ₹1.5L under 80C + pay ₹2L home loan interest + health premium, etc.). In contrast, the New Regime often benefits those with fewer deductions or lower incomes, since its slabs and rebates are very attractive. For example, under New Regime FY24-25, the effective tax on incomes up to ₹3 lakh is zero, and 5–10% on ₹3–10 lakh; if you have no deductions, your Old-Regime tax would be higher. The calculation tool above or official tax calculators can help decide based on your actual inputs.

FAQ: Switching & Benefits

Q: Is the New Regime mandatory?

A: For AY 2025–26 (FY2024-25), the New Regime is default. Employers will deduct tax as per New Regime unless you inform them otherwise during the year. However, you can opt back into the Old Regime in your ITR filing.

Q: How do I choose Old Regime?

A: In your income tax return (ITR), answer “Yes” to the option to opt out of Section 115BAC, and enter Form 10-IEA details if required (for business income). For salaried individuals, simply select Old Regime while filing ITR before the due date.

Q: Are HRA, 80C deductible in New Regime?

No. Under the New Regime, deductions like HRA, 80C, 80D, home loan interest, etc. are not allowed. You get only certain exemptions (employer NPS contribution, etc.).

Q: What about the ₹50,000 standard deduction?

The standard deduction of ₹50,000 for salaried taxpayers is available in both regimes for AY 2025–26.

Q: Can a senior citizen have an advantage?

In the Old Regime, basic exemption limits are higher for seniors (up to ₹3 lakh for 60–80 yr, ₹5 lakh for 80+), which can lower tax. The New Regime does not offer special higher exemptions for age (everyone gets same slabs).