As the financial year 2024–25 unfolds and Union Budget 2025 brings minor but impactful tweaks, taxpayers across India are again faced with a familiar question: Should I choose the Old Tax Regime or the New Tax Regime while filing my taxes? While both regimes aim to reduce your tax burden, each does so in very different ways.
This guide by Rits Capital breaks down the latest Income Tax Slabs, available deductions, and comparison points to help you decide which option is better for your ITR filing in 2025.
The Old Tax Regime is the traditional tax system, offering a wide range of deductions and exemptions to reduce your taxable income. You can claim deductions under sections like 80C (investments), 80D (health insurance), HRA (House Rent Allowance), and more.
The New Tax Regime, introduced in FY 2020-21, simplifies the structure by offering lower Income Tax Slabs but removes most deductions and exemptions. The goal is to simplify the tax filing process and benefit those who do not invest heavily in tax-saving instruments.
| Annual income | Tax rate |
| Up to ₹3,00,000 | 0% |
| ₹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 | 15% |
| Above ₹15,00,000 | 30% |
| Annual Income (₹) | Tax Rate |
| Up to ₹2,50,000 | 0% |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
| Feature | Old Tax Regime | New Tax Regime |
| Tax Rates | Higher rates | Lower rates |
| Deductions (80C, 80D, HRA, etc.) | Available | Not available |
| Standard Deduction | Limited/Not automatic | ₹50,000 for salaried and pensioners |
| Ideal for | Those with high deductions | Those with few or no deductions |
| Complexity | Higher (due to multiple exemptions) | Lower (simple structure) |
| HRA, LTA, Home Loan Benefits | Available | Not applicable |
| Applicability | Optional – must choose annually | Default regime unless opted out |
Let’s compare Old vs New Tax Regime with a real-world example to understand the potential savings.
Scenario:
Taxable Income = ₹12,00,000 – (₹1,50,000 + ₹25,000 + ₹1,00,000 + ₹50,000)
Net Taxable = ₹8,75,000
Tax (as per slab) = ₹87,500 (approx., excluding cess)
Taxable Income = ₹12,00,000 – ₹50,000 (Standard Deduction) = ₹11,50,000
Tax (as per slab):
Despite lower deductions, the New Tax Regime comes close in tax liability in this case due to lower rates. However, if more deductions (like home loan interest) were claimed, the Old Regime might offer greater savings.
Pros:
Cons:
Pros:
Cons:
Before you make a choice, follow these three simple steps:
1. Calculate Your Total Income
Include all sources: salary, business income, capital gains, and rental income.
2. Assess Your Deductions
List your investments, insurance premiums, home loan interest, education expenses, and medical insurance.
3. Use a Tax Calculator
There are many online tools (including one on the Rits Capital website) that help compare Old vs New Tax Regime side-by-side.
Note: You must declare your choice while filing your income tax return. Salaried employees can inform their employer in April but are allowed to change their choice during ITR filing.
There’s no one-size-fits-all answer. The right choice depends on your income level, spending habits, and ability to claim deductions.
At Rits Capital, we specialize in tax planning, investment strategies, and personal finance. If you’re unsure whether the Old or New Tax Regime is right for you in 2025, our experts can provide a detailed comparison tailored to your financial situation.
Book a consultation today and take the guesswork out of your taxes!
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FAQ’s:
1. What is the difference between the Old Tax Regime and New Tax Regime as per Union Budget 2025?
Ans: The Old Tax Regime allows you to claim various income tax deductions and exemptions like HRA, LTA, and Section 80C benefits. The New Tax Regime, updated in Union Budget 2025, offers revised income tax slabs with lower tax rates, but removes nearly all exemptions. Choosing the right regime depends on your investment habits and deductions claimed during ITR filing.
2. Which income tax slabs are more beneficial in 2025 — Old or New Tax Regime?
Ans: The New Tax Regime slabs for 2025 offer lower tax rates across multiple income levels, making it attractive for taxpayers who don’t claim many deductions. However, under the Old Tax Regime, if you utilize deductions like 80C, 80D, and home loan interest, you might end up paying less tax. You should compare Old vs New Tax Regime based on your eligible deductions and annual income.
3. Can I switch between the Old and New Tax Regimes each financial year?
Ans: Yes, if you are a salaried employee, you can switch between the Old Tax Regime and New Tax Regime every year at the time of ITR filing. However, if you have business income, switching is restricted to once unless you discontinue your business. Make sure to evaluate which regime aligns with your income and tax planning strategy each year.
4. Which tax regime is better for salaried individuals in FY 2024–25?
Ans: For salaried taxpayers, the better regime depends on how much they claim under deductions like Section 80C, 80D, and HRA. If your total deductions exceed ₹3 lakh, the Old Tax Regime may result in greater tax savings. If not, the New Tax Regime, with its simplified structure and lower income tax slabs, is likely more beneficial and hassle-free during tax filing.
5. How can I accurately compare the Old vs New Tax Regime in 2025?
Ans: To make the best decision, use a tax calculator or consult a financial advisor. List all your eligible deductions under the Old Tax Regime and compare it with your tax liability under the New Tax Regime’s revised income tax slabs. The goal is to determine which regime helps you save more income tax in 2025 based on your earnings, deductions, and filing status.