GST & Income Tax Guides India

Income Tax 19 April 2025 · Adv. Mahtab Ali Ansari 1 min read

income tax old vs new regime

From FY 2020-21, taxpayers can choose between two tax regimes: the Old Regime (with deductions and exemptions) and the New Regime (lower slab rates but no major deductions).

Old Tax Regime:

Allows deductions under:
- Section 80C (LIC, PPF, ELSS, etc.)
- Section 24(b) (Home Loan Interest)
- HRA, LTA, and standard deduction
Higher tax slabs

New Tax Regime (FY 2024-25 Slabs):

Income up to ?3,00,000 – Nil
?3,00,001 – ?6,00,000 – 5%
?6,00,001 – ?9,00,000 – 10%
?9,00,001 – ?12,00,000 – 15%
?12,00,001 – ?15,00,000 – 20%
Above ?15,00,000 – 30%
No major deductions allowed except for:
- NPS employer contribution
- Standard deduction (?50,000 for salaried from AY 2024-25)
- EPF & gratuity exemptions

Which to Choose?

If you have high deductions (above ?2.5 lakh), old regime may be better.
If you don’t claim many deductions, new regime offers better net savings.

Frequently Asked Questions

Which income tax regime is better for salaried employees in FY 2024-25?

For salaried employees, the new regime is beneficial if total deductions are below ₹2.5 lakh annually. However, if you have significant deductions like Section 80C investments, home loan interest under Section 24(b), and HRA exemption exceeding ₹2.5 lakh, the old regime typically results in lower tax liability. Use an online tax calculator comparing both regimes with your actual numbers before deciding.

What deductions are allowed under new tax regime in India 2024-25?

Under the new tax regime for FY 2024-25, only limited deductions are permitted: standard deduction of ₹50,000 for salaried individuals, employer's contribution to NPS under Section 80CCD(2), EPF contributions, and gratuity exemptions. Major deductions like Section 80C, HRA, LTA, and home loan interest under Section 24(b) are not available, making it less suitable for taxpayers with heavy investment-linked deductions.

Is income up to 7 lakh tax free under new regime in FY 2024-25?

Yes, effectively income up to ₹7 lakh is tax-free under the new regime due to the rebate under Section 87A. Although the 5% slab applies between ₹3–6 lakh and 10% between ₹6–9 lakh, the Section 87A rebate (up to ₹25,000) completely offsets the tax liability for individuals with total taxable income not exceeding ₹7 lakh, making the effective tax payable zero.

Can I switch between old and new income tax regime every year?

Salaried individuals and pensioners without business income can switch between old and new tax regimes every financial year at the time of filing their ITR. However, taxpayers with business or professional income can switch only once from the new regime back to the old regime. From FY 2023-24 onwards, the new regime is the default regime, so you must explicitly opt for the old regime if preferred.

What is the income tax slab rate for ₹12 lakh income under new regime 2024-25?

For a taxable income of ₹12 lakh under the new regime in FY 2024-25, tax is calculated as: Nil up to ₹3 lakh, 5% on ₹3–6 lakh (₹15,000), 10% on ₹6–9 lakh (₹30,000), and 15% on ₹9–12 lakh (₹45,000). Total tax before cess equals ₹90,000. Adding 4% health and education cess, the final liability is ₹93,600. Standard deduction of ₹50,000 can further reduce taxable income.

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Difference Between Old and New Income Tax Regimes in India (FY 2024-25)

Frequently Asked Questions

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