Old Tax Regime vs. New Tax Regime for AY 2025-26: Which One Should You Choose?

New Income Tax Slab Rates introduced in the Budget 2020 for AY 2021-22 onwards is kept optional for the taxpayers, where, they are open to choose the tax slabs of old regime (FY 2021-22). The New Tax Slabs are made common for taxpayers of all age groups with reduced income tax rates allowed in income brackets up to INR 15,00,000. But, it disallows 70 tax exemptions and deductions that are available as reliefs with Old Regime Tax Rates.

There is following Income Tax Rate under the New Tax Regime and Old tax Regime:-

• 4% Health and Education Cess is applicable on all the above taxes
• Rebate of Rs. 12,500 u/s 87A is applicable for tax slabs of old tax for taxes on annual income not exceeding Rs. 5.00 lakh. and Rebate of Rs. 25,000 u/s 87A is applicable for tax slabs of new regimes, for taxes on annual income not exceeding Rs. 7.00 lakh.

We’re giving a comparative study below to show how New Tax Slab Rates can reduce your tax liability, provided you’re ready to skip the allowed deductions of Old Tax Regime:

While opting for the new tax slab:-

• Option to be exercised on or before the due date (31 JULY 2024) of filing ITR for F.Y 2023-2024 (AY 2024-2025)
• Individuals/HUFs having no business income can choose between old and new regime tax slab every year.
• For those, who are having business income get one time chance to choose their option. Once done, they are to follow the rule every year, unless they cease this source of income.

Now let us discuss deductions available under Old Tax regime:

1. Deduction u/s 80 C upto 1,50,000/-
2. NPS U/S 80CCD(1B)
3. Medical insurance u/s 80D
4. Interest on Education loan u/s 80E
5. Interest on vehicle loan u/s 80EEB
6. Saving bank interest u/s 80TTA
7. HRA Exemption
8. LTA
9. Interest on home loan u/s 24b
10. Professional tax
11. Donation u/s 80G

We’re giving the easy scheme in which you can switch between Old and New Tax Slab Rates, when you wish to make an investment for tax deduction:

• 1. The taxpayers earning up to upto INR 5 lakh come under the rebate of INR 12,500 available in Section 87A and have zero tax liability. So, they are not coming under any available tax deduction.
• 2. For salary income of upto INR 7.50 lakh, if you have the investment amount of INR 2,00,000 or more eligible for tax deduction, opt for any Old Tax Regime/ New Tax Regime. But, if your investment is less than Rs 2,00,000/- that, go for New Tax Regime.

Note: The calculation is shown excluding the CESS amount.

• 3.  For income of upto INR 9.50 lakh, if you have the investment amount of INR 2,37,500 or more eligible for tax deduction, opt for Old Tax Regime But, if your investment is less than Rs 2,37,500/- that, go for New Tax Regime.

  Particulars	Old Regime (In INR)	New Regime (In INR)
  Taxable Income	9,50,000	9,50,000
  Less standard deduction	(50,000)	(50,000)
  Less Deduction Amount	(2,37,500)	-
  Taxable Amount	6,62,500	9,00,000
  Tax calculation	45,000	45,000

  Note:The calculation is shown excluding the CESS amount.

• 4. For income of upto INR 12.50 lakh, if you have the investment amount of INR 3,12,500 or more eligible for tax deduction, opt for Old Tax Regime But, if your investment is less than Rs 3,12,500/- that, go for New Tax Regime.

  Income tax rate slabs (Rs)

  Particulars	Old Regime (In INR)	New Regime (In INR)
  Taxable Income	12,50,000	12,50,000
  Less standard deduction	(50,000)	(50,000)
  Less Deduction Amount	(3,12,500)
  Taxable Amount	8,87,500	90,0000
  Tax calculation	90,000	90,000

• 5. For income of upto INR 15.50 lakh, if you have the investment amount of INR 3,75,000 or more eligible for tax deduction, opt for Old Tax Regime But, if your investment is less than Rs 3,75,000/- that, go for New Tax Regime.

Note:The calculation is shown excluding the CESS amount.

6. For income of upto INR 16.50 lakh, if you have the investment amount of INR 3,75,000 or more eligible for tax deduction, opt for Old Tax Regime But, if your investment is less than Rs 3,75,000/- that, go for New Tax Regime.

Note:The calculation is shown excluding the CESS amount. Note:income more than 15.50 lakh and investment /deduction Rs. 375000/- or more eligible for tax Old Tax Regime benefits. Exp :- 80 C = Rs 150000, 80 D = 25000, HRA / HOME LOAN 200000/- TOTAL Deduction move than 375000/- that, go for Old Tax Regime.

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