When the Government introduced the new tax regime under Section 115BAC, many salaried and self-employed individuals were left wondering—which is better: the old tax regime or the new one?
If you’ve asked this question yourself, you’re not alone. At CA Sujeet Choudhary’s Chartered Accountant Firm in Gurgaon, we regularly receive queries from individuals looking to make the best tax-saving decisions without the stress of decoding complex rules.
In this blog, we’ll break down the difference between both regimes—without the jargon—and help you understand how to decide what suits you best.
The Basics First
Old Tax Regime is the system most people were familiar with before 2020. It allows for a variety of deductions and exemptions—such as HRA, LTA, 80C (for PPF, ELSS, LIC), 80D (health insurance), and interest on home loans. These reduce your taxable income.
New Tax Regime, on the other hand, offers lower tax rates with more slabs but removes most deductions and exemptions. This system is meant to simplify tax filing.
From FY 2023–24, the new regime is now the default option. However, taxpayers can still choose the old one if they want to continue claiming deductions.
Old Tax Regime: Ideal If You Invest to Save
Here’s how the tax slabs work (for individuals under 60):
- Up to ₹2.5 lakh: Nil
- ₹2.5 lakh – ₹5 lakh: 5%
- ₹5 lakh – ₹10 lakh: 20%
- Above ₹10 lakh: 30%
If you regularly invest in tax-saving instruments or pay home loan EMIs, the old regime allows you to claim:
- ₹1.5 lakh under Section 80C
- Up to ₹2 lakh interest on home loan under Section 24(b)
- HRA if you live on rent
- Health insurance under Section 80D
- And several other deductions
Best for: Salaried individuals with a home loan, rent payments, and regular long-term investments. If your total deductions are more than ₹4.5 lakh, this regime could be more beneficial.
New Tax Regime: Clean, Simple, and For Low Deduction Cases
Under the new tax regime (FY 2024–25), the slabs are broader, and the rates are lower:
- Up to ₹3 lakh: Nil
- ₹3 lakh – ₹6 lakh: 5%
- ₹6 lakh – ₹9 lakh: 10%
- ₹9 lakh – ₹12 lakh: 15%
- ₹12 lakh – ₹15 lakh: 20%
- Above ₹15 lakh: 30%
For AY 2024–25, if your income is up to ₹7 lakh, you pay zero tax due to the rebate under Section 87A. You also get:
- A standard deduction of ₹75,000 (for salaried)
- ₹25,000 deduction for family pensioners
That’s it. You can’t claim 80C, HRA, LTA, or any typical deductions.
Best for: Individuals with no home loan, minimal tax-saving investments, or freelancers who prefer simplicity.
Which One Should You Choose?
There’s no universal answer. It depends on your income, spending, and savings pattern.
- If you’re paying rent, have a home loan, and invest regularly, the old regime gives you more flexibility and better tax savings.
- If you want to avoid paperwork, don’t invest much in 80C schemes, and want a hassle-free filing process, the new regime is likely better.
For instance:
- ₹12–15 lakh income with few deductions? New regime may help you save more.
- Same income, but with ₹4–5 lakh in deductions? Old regime could reduce your tax outgo significantly.
Every case is different, and that’s where expert guidance makes all the difference.
Filing Note: How to Choose the Right Regime?
- Salaried individuals (ITR-1/2): You can select your preferred regime directly while filing ITR—no extra forms needed.
- Self-employed/business owners (ITR-3/4/5): You must submit Form 10-IEA to opt for the old regime before filing.
Remember: if you have business income and opt out of the new regime, you may not be able to switch back freely in future years.
Conclusion
Choosing between the old and new tax regimes isn’t about which one is better in general—it’s about which one is better for you.
At CA Sujeet Choudhary’s CA Firm in Gurgaon, we help individuals and businesses make these choices based on a deep understanding of their financial profile, not guesswork. If you’re unsure, we recommend calculating your tax under both regimes—or better, let a professional assist you.
Still confused? Let a qualified chartered accountant decode the tax maze for you.
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