What are Old and New Tax Regimes?
The Indian government introduced the New Tax Regime in Budget 2020 as an alternative to the existing Old Tax Regime. Both regimes have different tax slabs and deduction structures, allowing taxpayers to choose the one that benefits them most.
Old Tax Regime: Allows various deductions and exemptions like Section 80C, 80D, HRA, LTA, etc., but has higher tax rates in some brackets.
New Tax Regime: Offers lower tax rates but with limited deductions and exemptions. It's designed to simplify tax calculations and reduce compliance burden.
FY 2024-25 Tax Slabs
Here are the tax slabs for FY 2024-25 under both regimes:
Old Tax Regime:
- Up to ₹2.5 lakh: No tax
- ₹2.5 lakh - ₹5 lakh: 5%
- ₹5 lakh - ₹10 lakh: 20%
- Above ₹10 lakh: 30%
New Tax Regime:
- Up to ₹3 lakh: No tax
- ₹3 lakh - ₹6 lakh: 5%
- ₹6 lakh - ₹9 lakh: 10%
- ₹9 lakh - ₹12 lakh: 15%
- ₹12 lakh - ₹15 lakh: 20%
- Above ₹15 lakh: 30%
Key Deductions and Exemptions
Understanding available deductions is crucial for choosing the right regime:
- Section 80C: Life insurance, PPF, ELSS, EPF, NSC (Max ₹1.5 lakh)
- Section 80D: Health insurance premium (Max ₹25,000-₹1 lakh)
- HRA: House Rent Allowance exemption
- LTA: Leave Travel Allowance (Max ₹20,000)
- Section 80CCD(1B): Additional NPS contribution (Max ₹50,000)
- Standard Deduction: ₹50,000 (available in both regimes)
Note: Most deductions are available only in the Old Regime. The New Regime offers limited deductions.
How to Choose the Right Regime?
Here are some guidelines to help you choose:
- High Deductions: If you have significant deductions (>₹1.5 lakh), Old Regime might be better
- Low Deductions: If you have minimal deductions, New Regime might save you tax
- Income Level: Middle-income earners often benefit from New Regime
- Simplicity: New Regime offers simpler tax calculations
- Future Planning: Consider your long-term investment and deduction plans
Use our calculator to compare both regimes based on your specific income and deduction profile.