Ever since the Union Budget on February 1, 2025, tweaked the new tax regime slabs, many taxpayers have been wondering whether to stick with the old tax regime or switch to the new one. The government’s adjustments in the new tax regime include exempting up to Rs 4 lakh from basic tax and offering tax relaxations for higher-income earners, with the top tax rate of 30% now applicable only for those earning above Rs 24 lakh per annum. After the latest changes to slabs and rebate advantage, now individuals earning up to Rs 12.75 lakh will not be paying any taxes.
While the old tax regime remains unchanged, it still offers numerous deductions and exemptions that can significantly lower taxable income for individuals under mid to high-income brackets. If fully utilised, these deductions can make the old tax regime more beneficial for certain income brackets, particularly those who have planned their investments effectively.
Also read: If you think only Rs 12.75 lakh is tax-free, NPS can raise it to Rs 13.7 lakh under new tax regime — Here’s how! Old Vs. New Tax Regime: Why the old regime can still be better for some taxpayers
To maximise benefits under the old tax regime, taxpayers must have a proper investment strategy that enables them to claim various deductions. However, not everyone makes investments with tax-saving goals in mind, which may limit their ability to take full advantage of the deductions available.
Let’s take a closer look at a taxpayer earning Rs 15 lakh annually and compare their tax liabilities under both regimes.
Tax calculation under the old regime (Salary Rs 15 lakh)
Tax slabs under old regime:
Rs 0 – 2.5 lakh: 0%
Rs 2.5 lakh – 5 lakh: 5%
Rs 5 lakh – 10 lakh: 20%
Above Rs 10 lakh: 30%
Deductions and exemptions (Old tax regime)
Standard Deduction: Rs 50,000
Section 80C (Max): Rs 1,50,000
Section 80D (Max): Rs 75,000
Home Loan Interest (Section 24B): Rs 2,00,000
Additional NPS Deduction (80CCD(1B)): Rs 50,000
Total Deductions: Rs 5.25 lakh
HRA Exemption: Rs 3 lakh (Assumed for a salaried individual receiving Rs 50,000 as basic salary with an HRA component of Rs 25,000 per month)
Taxable income calculation:
Gross salary: Rs 15,00,000
Less total deductions (Rs 5.25 lakh + Rs 3 lakh HRA): Rs 8.25 lakh
Net taxable income: Rs 6.75 lakh
Tax payable under old regime:
Rs 0 –
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