Note – This blog has been updated based on Budget 2025 announcements. You can understand how the latest changes will impact your tax calculation in Financial Year 2025-26 and Assessment Year 2026-27.
In the 2024 Budget, Finance Minister Nirmala Sitharaman introduced two key changes to the New Tax Regime, making it more attractive. First, the standard deduction limit has been increased to Rs 75,000 from Rs 50,000 for new tax regime taxpayers, and second, the slabs have been revised between 3 and 10 lakh income.
Launched in the 2020 Budget, the New Tax Regime aims to simplify taxes by reducing the need for deductions and exemptions. This makes it easier for those who prefer straightforward tax planning.
However, if you prefer maximizing tax savings through deductions and exemptions, you must compare both regimes carefully. Here’s a detailed comparison to help you decide between the New and Old Tax Regimes for 2024.
Old Tax Regime Highlights
The old tax regime is popular among taxpayers because it offers a wide array of deductions and exemptions.
This regime allows you to reduce your taxable income by claiming deductions for various investments and expenses, including children’s tuition fees, health insurance premiums, interest on home loans, and contributions to investment schemes like ELSS or PPF, as per the provisions of the Income Tax Act.
These benefits make it an attractive option for those who actively invest in tax-saving instruments and have significant eligible expenses. Here are some of the key highlights:
Basic Exemption Limit: The basic exemption limit is Rs 2.5 lakh, so there will be no tax if your income is within this limit.
Tax Rebate: Offers tax rebate of upto Rs 12,500 if your income does not exceed Rs 5 lakh. Simply put, there will be zero tax if your income is upto Rs 5 lakh due to rebate benefit.
Deductions/ Exemptions: Eligible for deductions under sections such as Section 80C, 80D, 80E, 80EE, 80U, 80G, 80TTA, etc.
New Tax Regime Highlights
A new tax regime was introduced in 2020 to simplify the tax structure by offering lower taxes to taxpayers.
Nonetheless, it offers low tax rates, but you must also forgo some popular deductions/ exemptions, such as Section 80C, 80D, 80E, 80G, 80U, etc.
It does not allow any deductions or exemptions, making it straightforward and potentially beneficial with fewer investments and eligible expenses. Here are some of the key highlights:
Standard Deduction: As per the Budget 2024, you can now claim a standard deduction of upto Rs 75,000 under this regime.
Basic Exemption Limit: The basic tax exemption limit is Rs 4 lakhs, compared to Rs 2.5 lakhs in the old tax regime. So, income up to Rs 4 lakh is exempt from tax.
Tax Rebate: Income upto Rs 12 lakh is eligible for a tax rebate, which means even if taxable income is upto 12 lakh, there will be zero tax due to rebate benefits.
Lower Slab Rates: Compared to the old tax regime, the new tax regime has lower slab rates.
How is New regime different from Old Tax regime: New vs Old Tax regime
The new tax regime is different from the old tax regime in three aspects.
- The new tax regime has more slab rates than the old one, making it more attractive to taxpayers due to the reduced tax structure. The tax rates under the new tax regime are now 0%, 5%, 10%, 15%, 20%, 25% and 30%. However, for the old tax regime, the rates are 0%, 5%, 20%, and 30%.
- The exemptions and deductions in the Old Regime are not available in the New one. The only benefit allowed under the New Tax Regime is the standard deduction of Rs 75,000. However, for Old Regime taxpayers, it is Rs 50,000 only.
- If the taxable income (after all deductions) under the old regime is below Rs 5 lakh, then the individual doesn’t need to pay any tax. Under the New Regime, the entire income will be tax-free if the taxable income is under Rs 12 lakh.
Here is a comparison between the old and new tax slabs
| Tax Slabs Under New And Old Regime | |||
| Old Tax Regime | New Tax Regime | ||
| Tax Slabs | Rates | Tax Slabs | Rates |
| Upto Rs 2.5 lakhs | 0% | Upto Rs 4 lakh | 0% |
| Rs 2.5 lakhs – Rs 5 lakhs | 5% | Rs 4 lakh to Rs 8 lakh | 5% |
| Rs 5 lakhs – Rs 10 lakhs | 20% | Rs 8 lakh to Rs 12 lakh | 10% |
| Rs 12 lakh to Rs 16 lakh | 15% | ||
| Rs 16 Lakhs to Rs 20 Lakhs | 20% | ||
| Rs 20 Lakhs to Rs 24 Lakhs | 25% | ||
| Above Rs 10 lakhs | 30% | Above Rs 24 Lakhs | 30% |
Deductions and Exemptions in New and Old Tax Regimes
Here are some common deductions/Exemptions available under both tax regimes for the taxpayers:
| Particulars | Old Tax Regime | New Tax Regime (From 1st April 2025) |
| Standard Deduction | Yes (Rs 50,000) | Yes (Rs 75,000) |
| Rebate u/s 87A | Yes (Upto Rs12,500) | Yes (Upto Rs60,000) |
| HRA Exemption | Yes | No |
| Leave Travel Allowance (LTA) | Yes | No |
| Entertainment Allowance and Professional Tax | Yes | No |
| Interest on Home Loan under Section 24b for self-occupied or vacant property | Yes | No |
| Interest on Home Loan under Section 24b for let-out property | Yes | Yes |
| Deduction under Section 80C (EPF, LIC, ELSS, PPF, FD, Children’s tuition fees, etc.) | Yes | No |
| Employee’s contribution to NPS | Yes | No |
| Employer’s contribution to NPS | Yes | Yes |
| Medical insurance premium under Section 80D | Yes | No |
| Deduction for disabled individuals under Section 80U | Yes | No |
| Interest on education loan under Section 80E | Yes | No |
| Donations to Political Parties or Trusts under Section 80G | Yes | No |
| Interest on Saving Account under Section 80TTA and 80TTB | Yes | No |
| All contributions to Agniveer Corpus Fund under Section 80CCH | Yes | Yes |
| Deduction on Family Pension Income | Yes | Yes |
Old Vs. New Tax Regime: Which One Should You Pick?
Unfortunately, there is no straightforward answer. The culprit is the complexity of the Indian tax regulations.
Comparing the Old and New Tax regimes may look complicated at first. But if you approach it systematically, it is not that difficult to figure out what works best for you.
Here are some steps to determine whether you must opt for the Old or New Regime.
- Calculate all the exemptions: If you live on rent, you could claim HRA, one of the biggest salary exemptions. Other tax-free components include LTA, food bills, phone bills, etc. All these will become taxable if you shift to the new tax regime. You will get the Standard Deduction by default in the Old as well as the new Regime.
- Look at deductions: In the Old Regime, there are numerous deductions like those available under Section 80C, home loan interest paid, and suchlike. In the New, you won’t get any deductions.
Now, combine these exemptions and deductions and subtract them from your salary to find out your taxable income and what it would be if you let go of these deductions. This should be the deciding factor between the new and old tax regimes.
Alternatively, you can also use Income Tax Calculator to calculate your tax payable under both regimes and decide which regime is better suited to you.
Let’s take three examples or scenarios to see how deductions and exemptions, or lack thereof, will impact taxes under the New Tax Regime and the Old one.
We have considered the most common deductions. In each scenario, your taxable income under the Old Tax Regime can be reduced further if you consider other exemptions such as HRA, LTA, etc.
Calculating Income Tax under New and Old Tax Regime
Let’s take three examples or scenarios to understand how tax will be calculated under both regimes.
We will examine how deductions and exemptions, or the lack thereof, will impact taxes under the New and Old tax regimes.
We have considered the most common deductions. In each scenario, your taxable income under the Old Tax Regime can be reduced further if you consider other exemptions such as HRA, LTA, etc.
Scenario 1: When You Don’t Claim Any Deduction Or Exemption
In this scenario, we compare the two regimes assuming that the individual does not claim any deduction in both.
Assume Sumit is an employee who works as an engineer and has an income of Rs 9 lakh. Unfortunately, due to his education expenditure and family obligations, he is unable to avail deductions available under the old tax regime. So under the old tax regime, his tax liability comes out to be Rs 85,800.
This is how the calculations work for Sumit.
Taxable income: Rs 9,00,000 – Rs 50,000 (Standard Deduction) = Rs 8,50,000
Taxable income under new tax regime: Rs 9,00,000 – Rs 75,000 (Standard Deduction) = Rs 8,25,000
| Income Tax Calculation Under Old Tax Regime | ||
| Tax Slabs Under Old Tax Regime | Tax Rate | Amount (₹) |
| Taxable Income | Rs. 8,50,000 | |
| 0 – 2,50,000 | 0% | NA |
| 2,50,000 – 5,00,000 | 5% | 12,500 (5% *2,50,000) |
| 5,00,000 – 10,00,000 | 20% | 70,000 (20% * 3,50,000) |
| 10,00,000 & above | 30% | NA |
| Total Tax | 82,500 | |
| Cess @ 4% | 3,300 | |
| Total Tax Inclusive Of Cess | 85,800 | |
So, the tax outgo on Rs 8,50,000 will be Rs 85,800. If Sumit chooses the new tax regime, his total tax outgo will be zero.
To help you avoid the above calculations, we have provided the tax liability under both regimes at different income levels in the table below. When you don’t avail deductions, the New Tax Regime works out to be better.
| Tax Paid Under Old And New Tax Regime for FY 2025-26 (in ₹) | |||
| Income | Old Regime | New Regime | Savings Under New Regime |
| 6,00,000 | 23,400 | 0 | 23,400 |
| 7,00,000 | 44,200 | 0 | 44,200 |
| 8,00,000 | 65,000 | 0 | 65,000 |
| 9,00,000 | 85,800 | 0 | 85,800 |
| 10,00,000 | 1,06,600 | 0 | 1,06,600 |
| 11,00,000 | 1,32,600 | 0 | 1,32,600 |
| 12,00,000 | 1,63,800 | 0 | 1,63,800 |
| 13,00,000 | 1,95,000 | 66,300 | 1,20,000 |
| 14,00,000 | 2,26,200 | 81,900 | 1,44,300 |
| 15,00,000 | 2,57,400 | 97,500 | 1,59,900 |
| 16,00,000 | 2,88,600 | 1,13,100 | 1,75,500 |
| 17,00,000 | 3,19,800 | 1,30,000 | 1,89,800 |
| 18,00,000 | 3,51,000 | 1,50,800 | 2,00,200 |
| 19,00,000 | 3,82,200 | 1,71,600 | 2,10,600 |
| 20,00,000 | 4,13,400 | 1,92,400 | 2,21,000 |
| 21,00,000 | 4,44,600 | 2,14,500 | 2,30,100 |
| 22,00,000 | 4,75,800 | 2,40,500 | 2,35,300 |
| 23,00,000 | 5,07,000 | 2,66,500 | 2,40,500 |
| 24,00,000 | 5,38,200 | 2,92,500 | 2,45,700 |
| 25,00,000 | 5,69,400 | 3,43,200 | 2,26,200 |
Note: The above calculations reflect changes made in the Budget 2024
Scenario 2: When Deduction Under Section 80C & 80D is Claimed
In this scenario, we consider that the taxpayer takes Rs 1,50,000 and Rs 50,000 benefits under sections 80C and 80D, respectively. So, if you include the standard deduction of Rs 50,000, the taxpayer gets a total deduction of Rs 2.5 lakh.
| Tax Paid Under Old And New Tax Regime for FY 2025-26 (in ₹) | |||
| Income | Old Regime | New Regime | Savings Under New Regime |
| 6,00,000 | 0 | 0 | 0 |
| 7,00,000 | 0 | 0 | 0 |
| 8,00,000 | 23,400 | 0 | 23,400 |
| 9,00,000 | 44,200 | 0 | 44,200 |
| 10,00,000 | 65,000 | 0 | 65,000 |
| 11,00,000 | 85,800 | 0 | 85,800 |
| 12,00,000 | 1,06,600 | 0 | 1,06,600 |
| 13,00,000 | 1,32,600 | 66,300 | 66,300 |
| 14,00,000 | 1,63,800 | 81,900 | 81,900 |
| 15,00,000 | 1,95,000 | 97,500 | 97,500 |
| 16,00,000 | 2,26,200 | 1,13,100 | 1,13,100 |
| 17,00,000 | 2,57,400 | 1,30,000 | 1,27,400 |
| 18,00,000 | 2,88,600 | 1,50,800 | 1,37,800 |
| 19,00,000 | 3,19,800 | 1,71,600 | 1,48,200 |
| 20,00,000 | 3,51,000 | 1,92,400 | 1,58,600 |
| 21,00,000 | 3,82,200 | 2,14,500 | 1,67,700 |
| 22,00,000 | 4,13,400 | 2,40,500 | 1,72,900 |
| 23,00,000 | 4,44,600 | 2,66,500 | 1,78,100 |
| 24,00,000 | 4,75,800 | 2,92,500 | 1,83,300 |
| 25,00,000 | 5,07,000 | 3,43,200 | 1,63,800 |
Note: The above calculations reflect changes made in the Budget 2024
Scenario 3: When Taxpayer Claims Deduction Under Section 80C, For NPS Investments, Interest On Home Loan And Health Insurance Premium
In this scenario, we have considered employees who claim deductions not only from their investments under section 80C and 80CCD (1B) worth Rs 2 lakh but also claim a deduction for interest paid on home loans (Rs 2 lakh) and health Insurance premiums (Rs 25,000).
For someone who can claim all the above deductions, the new tax regime is still a better option.
| Tax Paid Under Old And New Tax Regime for FY 2025-26 (in ₹) | |||
| Income | Old Regime | New Regime | Savings Under New Regime |
| 6,00,000 | 0 | 0 | 0 |
| 7,00,000 | 0 | 0 | 0 |
| 8,00,000 | 0 | 0 | 0 |
| 9,00,000 | 0 | 0 | 0 |
| 10,00,000 | 18,200 | 0 | 18,200 |
| 11,00,000 | 39,000 | 0 | 39,000 |
| 12,00,000 | 59,800 | 0 | 59,800 |
| 13,00,000 | 80,600 | 66,300 | 14,300 |
| 14,00,000 | 1,01,400 | 81,900 | 19,500 |
| 15,00,000 | 1,24,800 | 97,500 | 27,300 |
| 16,00,000 | 1,56,000 | 1,13,100 | 42,900 |
| 17,00,000 | 1,87,200 | 1,30,000 | 57,200 |
| 18,00,000 | 2,18,400 | 1,50,800 | 67,600 |
| 19,00,000 | 2,49,600 | 1,71,600 | 78,000 |
| 20,00,000 | 2,80,800 | 1,92,400 | 88,400 |
| 21,00,000 | 3,12,000 | 2,14,500 | 97,500 |
| 22,00,000 | 3,43,200 | 2,40,500 | 1,02,700 |
| 23,00,000 | 3,74,400 | 2,66,500 | 1,07,900 |
| 24,00,000 | 4,05,600 | 2,92,500 | 1,13,100 |
| 25,00,000 | 4,36,800 | 3,43,200 | 93,600 |
Note: The above calculations reflect changes made in the Budget 2025
The changes introduced don’t really make things easier for you. However, there’s one mistake you must avoid. Don’t select the Old Tax Regime and then make investments to save taxes. Saving taxes is incidental. You should not invest, buy insurance or donate only to save tax.
Achieving your financial goals and securing your family’s future should be the reasons driving your decision, not the tax benefits.