Which Is Better: The Old Tax Regime Or The New Tax Regime?

Pragya Pathak

Author

Updated: 16-04-2025 at 12:37 PM

Recently, the Finance Minister of India, Smt Nirmala Sitharaman announced the particulars of the Union Budget of 2025. The budget 2025 comprises and consists of various new additions and changes in the existing policies including the tax policies.

The government of India with the announcement of the Budget 2025 has introduced some changes in the New Tax Regime to make it more appealing to the taxpayers of the nation. The topic of income Tax has always been controversial with the constant comparison between the Old Tax Regime and the New Tax Regime.

Read the article to know what changes have been introduced in the New Tax Regime and if those changes make it better than the Old Tax Regime.

Changes In The New Tax Regime

With the announcement of the Budget 2025, the government has refined the specifics of the New Tax Regime by introducing some changes such as:

Individuals with an annual income of up to Rs. 12 lakhs aren’t required to pay income tax.
Individuals with an annual income between Rs. 20 lakh – Rs. 24 lakh are given a 25% tax slab.
The standard deduction for salaried individuals has been increased to Rs. 75,000.
As per Section 24(b), the interest on housing loans has been deducted.
As per Section 80CCD(2), the contributions made by the employer according to the National Pension Scheme (NPS) have been deducted up to 14% of the salary.

Refined Tax Slabs Under The New Tax Regime

The tax slabs under the New Tax Regime have been modified for the betterment of people. The revised tax slabs are mentioned below:

Income Level (In Rupees)	% of Tax
Income up to Rs. 4 lakh	None
Rs. 4 lakh – Rs. 8 lahks	5%
Rs. 8 lakh – Rs. 12 lahks	10%
Rs. 12 lakh – Rs. 16 lahks	15%
Rs. 20 lakh – Rs. 24 lakh	25%
More than Rs. 24 lakh	30%

About The Old Tax Regime

The Old Tax Regime comprised various deductions and exemptions which allowed the taxpayers to reduce their taxable income and earn extra by investing in various security options. Section 80C allowed an exemption of Rs. 1.5 lakh for making investments in Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), and Life Insurance Corporation (LIC) premiums.

Tax Slabs Under The Old Tax Regime

The tax slabs under the Old Tax Regime are mentioned below in tabular form so that one can make an informed comparison of the two regimes:

Income Level (In Rupees)	% of Tax
Income up to Rs. 2.5 lakh	None
Rs. 2.5 lakh – Rs. 5 lakh	5%
Rs. 5 lakh – Rs. 10 lakh	20%
More than Rs. 10 lakh	30%

Which Tax Regime Should One Choose?

It might look like a difficult and complex decision to make between choosing the better tax regime but it isn’t.

People who aren’t interested in making heavy investments should opt for the New Tax Regime as it has lower tax rates and a high exemption limit. However, people who claim multiple deductions would be better off under the Old Tax Regime.

Conclusion

The government of India has introduced Tax Regimes to make the taxation system organised and streamlined. Both the New Tax Regime and the Old Tax Regime are to benefit people so please understand each of the system’s particulars for making an informed decision.

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