Old vs. New Tax Regime: 8 Reasons Why the Old Still Appeals in FY 2024-25

Since the launch of India’s New Tax Regime, it has been promoted as a simpler option with lower tax rates. However, simplicity doesn't always lead to savings. For many taxpayers, especially salaried individuals and investors, the Old Tax Regime still provides solid financial benefits.

Here are eight strong reasons why the Old Regime still makes more financial sense for many individuals.

1. Section 80C Deductions – The Biggest Advantage

The Old Tax Regime allows deductions of up to ₹1.5 lakh under Section 80C for common investments and expenses such as:

• Employee Provident Fund (EPF/VPF)
• Public Provident Fund (PPF)
• Life Insurance Premiums
• ELSS Mutual Funds
• Home Loan Principal Repayment
• Tuition Fees for up to two children

These deductions are widely used and can significantly reduce taxable income.

2. Home Loan Interest – Section 24(b)

Taxpayers with home loans can claim a deduction of up to ₹2 lakh on interest paid for a self-occupied property under Section 24(b). This benefit is not available under the new regime.

3. Health Insurance – Section 80D

Premiums paid for health insurance are deductible under Section 80D:

• ₹25,000 for self, spouse, and dependent children (if all are below 60)
• ₹25,000 or ₹50,000 for parents (based on their age)

This helps lower tax liability and promotes financial security for health-related expenses.

4. Education Loan Interest – Section 80E

Interest paid on education loans for higher studies (for self, spouse, or children) can be fully deducted under Section 80E for up to eight years or until the interest is fully paid.

5. NPS Contributions – Section 80CCD(1B)

Taxpayers contributing to the National Pension System (NPS) can claim an extra deduction of ₹50,000 under Section 80CCD(1B) beyond the ₹1.5 lakh limit of Section 80C. This benefit is only available under the Old Regime.

6. Leave Travel Allowance (LTA) and House Rent Allowance (HRA)

Salaried individuals can claim exemptions for:

• LTA: Travel expenses incurred during leave, allowed twice in a block of four years
• HRA: Rent paid by individuals living in rented accommodation

These are standard exemptions that lower taxable salary and are not available under the New Regime.

7. Standard Deduction

Salaried employees can take a standard deduction of ₹50,000 under the Old Regime, which is subtracted directly from salary income before taxation.

8. Other Deductions: Sections 80G, 80DD, and 80U

The Old Regime allows additional deductions that can help specific taxpayers:

• Section 80G: Donations to approved charitable institutions
• Section 80DD: Medical expenses for dependents with disabilities
• Section 80U: Tax relief for individuals with disabilities

These deductions are completely missing from the New Regime.

Old vs New Tax Regime: Quick Comparison

Who Should Prefer the Old Tax Regime?

• Salaried individuals with rent or home loan obligations
• Taxpayers investing under Section 80C
• Individuals with high health insurance premiums
• Parents paying for children's education
• Those making donations or supporting dependents with disabilities

Final Thought

Choosing between the old and new tax regimes isn't just about comparing tax rates. It's also about assessing the total tax liability after applying all eligible deductions and exemptions. For individuals with a well-structured investment and insurance portfolio, the Old Tax Regime can still be more beneficial.

For expert help in selecting the right tax regime, calculating your tax liability, or filing your Income Tax Return, contact us at +91 99710 55886 or +91 81303 09886.

Website: www.myitronline.com

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