Old Vs New Tax Regime Part 1

By | October 11, 2025
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Old Vs New Tax Regime Part 1

  • Video Series Overview [00:06]: This is Part 1 of a three-part video series comparing the Old and New Tax Regimes. This part covers an overview of the schemes, applicable tax slabs, and benefits of opting in or out. Part 2 will discuss the procedure for opting out, and Part 3 will cover FAQs.

 

New Tax Regime Introduction and Evolution

 

  • Introduction [00:40]: The New Tax Regime was introduced for individuals and Hindu Undivided Families (HUFs) in Budget 2020. It offered concessional tax rates with the condition that several exemptions and deductions available in the Old Tax Regime would not be allowed.
  • Recent Focus [01:02]: In Union Budget 2024 and 2025, the government focused on making the New Tax Regime more attractive. It was also extended to Associations of Persons (other than cooperative societies), Bodies of Individuals, and Artificial Juridical Persons [01:10].
  • Default Regime [05:09]: From Assessment Year 2024-25 (Financial Year 2023-24), the New Tax Regime has been set as the default regime. If you wish to continue using the Old Tax Regime, you must opt out in your Income Tax Return or file Form 10-IEA (if you have business income) at or before the time of filing your ITR [07:59].

 

Old Tax Regime

 

  • Definition [01:31]: Refers to the system of income tax calculation and slabs that existed before the introduction of the New Tax Regime.
  • Deductions & Exemptions [01:37]: Individuals have the option to claim over 70 various deductions and exemptions to reduce their taxable income.
  • Tax Slabs (Based on Age) [01:44]:
    • Individuals (less than 60 years), AOPs, BOIs, AJPs: Basic exemption limit is ₹2.5 lakhs.
    • Resident Senior Citizens (60-80 years): Basic exemption limit is ₹3 lakhs.
    • Resident Super Senior Citizens (80+ years): Basic exemption limit is ₹5 lakhs.
  • Tax Rebate [02:22]:
    • Up to ₹12,500 for resident individuals less than 60 years of age.
    • Up to ₹10,000 for resident senior citizens.
    • This rebate is applicable if the total income does not exceed ₹5 lakhs.

 

New Tax Regime Tax Rates

 

  • Financial Year 2024-25 (Assessment Year 2025-26) [02:40]:
    • Up to ₹3 lakhs: No tax.
    • ₹3 lakhs to ₹7 lakhs: 5%.
    • ₹7 lakhs to ₹10 lakhs: 10%.
    • ₹10 lakhs to ₹12.5 lakhs: 15%.
    • ₹12.5 lakhs to ₹15 lakhs: 20%.
    • Above ₹15 lakhs: 30%.
    • Tax Rebate: Up to ₹25,000 is applicable to resident individuals if total income does not exceed ₹7 lakhs [03:00].
  • Financial Year 2025-26 (Assessment Year 2026-27) [03:25]:
    • Up to ₹4 lakhs: No tax.
    • ₹4 lakhs to ₹8 lakhs: 5%.
    • ₹8 lakhs to ₹12 lakhs: 10%.
    • ₹12 lakhs to ₹16 lakhs: 15%.
    • ₹16 lakhs to ₹20 lakhs: 20%.
    • ₹20 lakhs to ₹24 lakhs: 25%.
    • Above ₹24 lakhs: 30%.
    • Tax Rebate: Up to ₹60,000 is applicable to resident individuals if total income does not exceed ₹12 lakhs [03:53].
  • Important Notes (Both Regimes) [03:10, 03:59]:
    • Surcharge and cess are applicable over and above the tax rates.
    • Marginal relief on rebate is available.
    • Rebate under Section 87A is not available for income taxed at special rates (e.g., Capital Gains under Section 112A).
  • Lower Surcharge Rate (New Tax Regime) [04:13]:
    • For High Net Worth Individuals, HUFs, AOPs, BOIs, and AJPs, the surcharge rate on total income above ₹5 crore has been reduced from 37% to 25%.
    • This has reduced the highest effective tax rate from 42.74% to 39% in the New Tax Regime.
    • Maximum surcharge rate on income from dividends or income under Sections 111A, 112A, and 115AD is restricted to 15% [04:46].
    • For AOPs consisting only of companies as members, the maximum surcharge rate is 15% [04:55].

 

Comparison of Deductions

 

  • Old Tax Regime (Key Deductions/Exemptions) [05:34]:
    • Standard Deduction from salary (₹50,000).
    • Leave Travel Allowance.
    • Section 80TTA and 80TTB deductions (interest on savings/deposits).
    • Deduction of Professional Tax (Section 16(iii)).
    • House Rent Allowance (HRA) exemption.
    • Exemptions for free food and beverages through vouchers/food coupons (Section 17(2)(viii)).
    • Deductions up to ₹1.5 lakhs under Chapter VIA (e.g., 80C, 80CCC, 80CCD(1)).
    • Deduction under Section 80CCD(2) (employer’s contribution to NPS).
    • Deduction under Section 80CCD(1B) (up to ₹50,000 for NPS).
    • Medical Insurance Premium under Section 80D.
    • Interest on home loan for self-occupied or vacant property.
    • Set-off of losses under the head “Income from House Property.”
  • New Tax Regime (Available Deductions/Exemptions) [06:28]:
    • Standard Deduction from salary is now also available in the new tax regime.
    • Deductions under Section 80CCD(2) for employer’s contribution to an employee’s NPS account.
    • Transport Allowance for specially-abled persons.
    • Conveyance Allowance received to meet conveyance expenditure incurred as part of employment.
    • Compensation received to meet the cost of travel on tour or transfer.
    • Daily Allowance received to meet ordinary regular charges/expenditure due to absence from regular place of duty.
    • Perquisites for official purposes.
    • Exemption on Voluntary Retirement (Section 10(10C)).
    • Gratuity under Section 10(10).
    • Leave Encashment under Section 10(10AA).
    • Interest on home loan on let-out property (under Section 24).
    • Gifts up to ₹50,000.
    • Deduction for employer’s contribution to NPS account under Section 80CCD(2).
    • Deduction on Additional Employee Cost under Section 80JJA.
    • Standard Deduction of ₹75,000 is allowed against income under the head “Salary” (for FY 2025-26, AY 2026-27).
    • Deduction of family pension income under Section 57(iia).
    • Deduction for amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).

 

Choosing the Regime

 

  • Benefits of New Tax Regime [08:32]: Reduced tax rates, but fewer deductions available.
  • Benefits of Old Tax Regime [08:44]: Benefit of more than 70 exemptions and deductions, but higher tax rates.
  • Decision Tool [08:52]: To determine the most beneficial tax regime, you can use the Income Tax Calculator available on the Income Tax Portal in the Quick Link section.

For more details, visit www.incometax.gov.in or contact their helpline numbers.