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New Tax Regime vs Old Tax Regime Which One Should You Choose?
Posted by Acutus Business Advisors LLP
Your Partners in Financial Growth & Compliance Management
The Income Tax filing season is round the corner … the due dates (for Salaried and Non tax -audit cases) have been extended to 15th September 2025, but yes, still the taxpayers continue to face the key question: “Should I opt for the new tax regime or stay with the old one?”
In Budget 2020, the Government of India introduced a new personal tax regime to simplify income tax slabs and provide an alternative to taxpayers. Fast forward to 2025, everyone is gung-ho about the ZERO TAX on income upto Rs. 12 Lakhs
To start-off, the Zero tax till income of Rs. 12 Lakhs was declared in the budget of February 2025 and will be applicable for FY 2025-26. Your tax liability for FY 24-25 for which the Income Tax return will be due by 15th September 2025 will be on your income from April 2024 to 31st March 2025 and the tax slabs applicable for that period are discussed on the forthcoming sections of this article.
What Are the Key Differences?
The Old Tax Regime allows multiple deductions and exemptions such as HRA, standard deduction, 80C (LIC, PPF, ELSS), and home loan interest. The New Tax Regime, however, offers lower slab rates but no major exemptions or deductions.
Tax rates for Individual (resident or non-resident) less than 60 years of age anytime during the previous year are as under:
| Old Tax Regime | New Tax Regime u/s 115BAC | ||||
| Income Tax Slab | Income Tax Rate | *Surcharge | Income Tax Slab | Income Tax Rate | *Surcharge |
| Up to ₹ 2,50,000 | Nil | Nil | Up to ₹ 3,00,000 | Nil | Nil |
| ₹ 2,50,001 – ₹ 5,00,000** | 5% above ₹ 2,50,000 | Nil | ₹ 3,00,001 – ₹ 7,00,000** | 5% above ₹ 3,00,000 | Nil |
| ₹ 5,00,001 – ₹ 10,00,000 | ₹ 12,500 + 20% above ₹ 5,00,000 | Nil | ₹ 7,00,001 – ₹ 10,00,000 | ₹ 20,000 + 10% above ₹ 7,00,000 | Nil |
| ₹ 10,00,001- ₹ 50,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | Nil | ₹ 10,00,001 – ₹ 12,00,000 | ₹ 50,000 + 15% above ₹ 10,00,000 | Nil |
| ₹ 50,00,001- ₹ 100,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 10% | ₹ 12,00,001 – ₹ 15,00,000 | ₹ 80,000 + 20% above ₹ 12,00,000 | Nil |
| ₹ 100,00,001- ₹ 200,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 15% | ₹ 15,00,001- ₹ 50,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | Nil |
| ₹ 200,00,001- ₹ 500,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 25% | ₹ 50,00,001- ₹ 100,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | 10% |
| Above ₹ 500,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 37% | ₹ 100,00,001- ₹ 200,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | 15% |
| Above ₹ ₹ 200,00,001 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | 25% | |||
✅ Under the New Regime, a standard deduction of ₹75,000 for salaried individuals.
❌ But exemptions like HRA, 80C, 80D, home loan interest, etc., are not available.
Who Should opt for Which Regime?
💼 Ideal for Old Tax Regime:
- – Taxpayers with home loans, insurance premiums, ELSS investments.
- – Salaried individuals who get HRA, LTA, and other allowances.
- – Families with education loans or medical insurance.
💡 Ideal for New Tax Regime:
- – Young professionals with fewer investments and deductions.
- – Freelancers and consultants who prefer simplicity.
- – Anyone who doesn’t claim deductions of more than ₹2–2.5 lakh.
How to Decide?
Deciding the beneficial tax regime is not straight forward. It involves considering various aspects like:
- Nature of Income – Salaried / Non-Salaried
- Nature and quantum of deductions available in current year and are likely to be available in subsequent years.
- Availability of documentation
Expert Tip
Switching between the regimes is allowed every year for salaried individuals. However, for those with business income, the choice is more restricted and requires a long-term view. Hence, businesses need meticulous planning and right execution as any error can have a long-term impact on taxation.
Still Confused? Let’s Talk!
Choosing the right tax regime is not just about rates—it is about aligning tax planning with your financial goals.
💬 Need help with personalized tax computation and saving strategies?
📲 Connect with our experts at Acutus Business Advisors LLP and make tax time stress-free.