Comparison of Deduction: Old Regime vs New Regime FY 2024-25
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Quick breakdown for Choosing Old or New Tax Regime for FY 2025-26 (AY 2026-27)
Choosing Old or New Tax Regime for FY 25-26: Time to declare to employer
it’s a crucial time for salaried individuals to optimize TDS deductions for FY 2025-26. Choosing Old vs New Tax Regime for FY 2025-26, Employees must declare their tax regime choice to their employer at the start of the financial year to ensure accurate TDS deductions on salary income . Deadline: Ideally, before the first payroll of FY 2025-26 (i.e., April 2025 salary processing). Can’t change during the year with employer, but you can switch while filing ITR. Your employer calculates monthly TDS based on the regime you declare. Wrong choice = higher TDS + refund wait after ITR filing.
Choose wisely for Lower TDS
What to consider before declaring: New vs Old Tax Regime: TDS on Salary (FY 2025-26)
| Criteria | Old Regime | New Regime (default) |
|---|---|---|
| Claiming Deductions (80C, 80D, etc.) | ✅ Yes – ideal if deductions > ₹3L | ❌ No major deductions allowed |
| Home Loan / HRA / NPS | ✅ All allowed | ❌ Not available |
| Standard Deduction | ✅ ₹50,000 | ✅ ₹50,000 |
| Simplicity | ❌ Slightly complex | ✅ Very simple |
| TDS Impact | Less if declaring all deductions | Less by default if no deductions |
Quick Comparison: Salary up to INR 12.75 lakh
If your gross salary is ≤ INR 12.75 lakh, you can Claim Standard Deduction of INR 50,000 and Claim Employer’s NPS contribution (say INR 25,000)
Effective Net Taxable Income: INR 12L
Tax Payable under New Regime: Zero, thanks to Section 87A rebate (for income up to INR 7 lakh, plus benefit extended by slab tweaks up to INR 7.5 lakh).
Result: New Regime may be better for most in this bracket.
Old Regime Tax (with Deductions)
You’ll need deductions (like 80C, 80D, HRA, home loan interest, etc.) to bring taxable income down. Breakeven Deduction = Approx. INR 3.75–INR 4.25 lakh for INR 20L income If your deductions exceed this, Old Regime is better , But No, If your deductions are less, New Regime is better
What Should You Do in April?
Why April Matters : April is when employers ask employees to declare their preferred tax regime to compute TDS for the year. The choice you make now directly impacts your monthly in-hand salary. step to be taken care,
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Estimate your deductions (HRA, 80C, 80D, 24(b), NPS, etc.)
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Use an Income Tax Calculator
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Choose the regime that results in lower tax for TDS purposes
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Submit your declaration to your employer (possibly along with Form 12BB)
Comparison of Deductions: Old Regime vs New Regime (FY 2024-25)
Here’s a clear comparison of deductions under the old vs. new tax regime for FY 2024-25 (AY 2025-26) to help you evaluate which regime may be better for you:
| Particulars | Old Regime | New Regime (Default) |
|---|---|---|
| Standard Deduction (Salary/Pension) | INR 50,000 | ✅ INR 50,000 (from FY 2023-24 onwards) |
| HRA (House Rent Allowance) | ✅ Allowed (subject to conditions) | ❌ Not Allowed |
| LTA (Leave Travel Allowance) | ✅ Allowed | ❌ Not Allowed |
| Section 80C (LIC, PPF, ELSS, etc.) | ✅ Up to INR 1.5 lakh | ❌ Not Allowed |
| Section 80D (Health Insurance) | ✅ Up to INR 25,000 / INR 50,000 (senior citizen) | ❌ Not Allowed |
| Section 80TTA / 80TTB (Savings Interest) | ✅ INR 10,000 / INR 50,000 (senior citizens) | ❌ Not Allowed |
| Section 80E (Education Loan Interest) | ✅ Allowed | ❌ Not Allowed |
| Section 24(b) (Home Loan Interest) | ✅ Up to INR 2 lakh (Self-occupied property) | ❌ Not Allowed |
| NPS (Section 80CCD(1B)) | ✅ Up to INR 50,000 | ❌ Not Allowed |
| Rebate u/s 87A (For Income ≤ ₹7 lakh) | ✅ INR 12,500 rebate | ✅ INR 25,000 rebate (for income up to INR 7 lakh) |
| Rebate u/s 87A (For Income ≤ INR 7L – INR 7.5L) | ❌ Rebate phases out | ✅ Effective rebate up to INR 7.5 lakh (via slab tweak) |
| Family Pension Deduction (u/s 57(iia)) | ✅ Up to INR 15,000 or 1/3rd of pension (whichever lower) | ✅ Allowed |
| Professional Tax (if paid) | ✅ Allowed | ❌ Not Allowed |
Tax Slabs Comparison
✅ Old Regime Slabs (with deductions):
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Up to INR 2.5L – Nil
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INR 2.5L–INR 5L – 5%
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INR 5L–INR 10L – 20%
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Above INR 10L – 30%
✅ New Regime Slabs (Post Budget 2023, default from FY 2023-24 onwards):
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Up to INR 3L – Nil
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INR 3L–INR 6L – 5%
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INR 6L–INR 9L – 10%
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INR 9L–INR 12L – 15%
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INR 12L–INR 15L – 20%
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Above INR 15L – 30%
Key Consideration Tips :
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Use a tax regime calculator or consult a professional. Save Form 12BB if you’re declaring under the old regime (to claim HRA, 80C, 80D, etc.). If your total deductions exceed INR 3 lakh, the Old Regime may be more beneficial.
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You can switch regimes while filing your ITR, even if you declared otherwise to employer (except for business income taxpayers—only one switch allowed). If not claiming many deductions or you prefer simplicity, the New Regime offers lower rates and ease of filing.
Checklist for Salaried Employee in New Regime (FY 2025-26)
- Opt for Corporate NPS (National Pension Scheme) : Claim tax benefit under section 80CCD(2) on employer’s contribution. Deduction up to 14% of basic salary is allowed (for central government employees) or up to 10% (for others).
- Disclose All Additional Incomes: Include Dividend Income, Rental Income, and Interest Income from Banks, etc., in your return.
- TDS on House Rent: Deduct 2% TDS if you are paying house rent above ₹50,000/month under section 194-IB.
- Post Office Interest Income: Exempt up to:
- ₹3,500 per year (single account)
- ₹7,000 per year (joint account)
- Interest in Home Loan: If you earn rental income, then deduct home loan interest under Income from House Property. (Note: Deduction under section 24(b) for self-occupied property is not allowed in the new regime.)
- LTCG on Shares: Long-Term Capital Gains (LTCG) on sale of listed shares/stocks are exempt up to ₹1.25 lakh/year under section 112A.
- Advance Tax Payment: Pay your advance tax timely to avoid interest under section 234B & 234C for delayed payments.