Indian Tax Regimes: Old vs. New (2025) – Which Saves You More Tax on Your ITR?
When completing your Income Tax Return (ITR) in India, a crucial decision is choosing between the Old Tax System and the New Tax System. This selection directly influences your tax savings, how you plan investments, and your available monthly funds.
Unsure which system suits your income and deduction situation? This blog explains the distinctions, including updated tax brackets, key features of the 2025 budget, practical examples, and advice from GetMyCA – your reliable tax advisor in India.
Understanding the Old and New Tax Systems
Old Tax System (With Deductions)
The Old System lets Indian taxpayers claim several exemptions and deductions, such as:
- Section 80C: Including ELSS, PPF, LIC, and NSC.
- Section 80D: Health insurance premiums.
- Section 24(b): Home loan interest payments.
- HRA: House Rent Allowance.
- LTA: Leave Travel Allowance.
- Standard Deduction: ?50,000
Best fit for: Those who invest in tax-saving instruments and have a lot of deductions.
New Tax Regime (Without Most Deductions)
Introduced in FY 2020–21 and revamped in Budget 2023, the New Regime offers reduced slab rates but removes most exemptions. In 2025, it became the default regime unless you opt-out.
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Income Tax Slab (INR)
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Old Regime
Tax Rate
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Old Regime
Surcharge
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New Regime (u/s 115BAC)
Tax Rate
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New Regime
Surcharge
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Notes
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Up to ?2,50,000
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Nil
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Nil
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Up to ?3,00,000 - Nil
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Nil
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Basic exemption
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?2,50,001 - ?5,00,000
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5% above ?2.5L
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Nil
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?3,00,001 - ?7,00,000: 5% above ?3L
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Nil
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No tax due to rebate u/s 87A (if income ≤ ?7L)
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?5,00,001 - ?10,00,000
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?12,500 + 20% above ?5L
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Nil
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?7,00,001 - ?10,00,000: ?20,000 + 10% above ?7L
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Nil
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|
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?10,00,001 - ?12,00,000
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?1,12,500 + 30% above ?10L
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Nil
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?50,000 + 15% above ?10L
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Nil
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|
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?12,00,001 - ?15,00,000
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?1,12,500 + 30% above ?10L
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Nil
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?80,000 + 20% above ?12L
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Nil
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|
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?15,00,001 - ?50,00,000
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?1,12,500 + 30% above ?10L
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Nil
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?1,40,000 + 30% above ?15L
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Nil
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|
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?50,00,001 - ?1,00,00,000
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?1,12,500 + 30% above ?10L
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10%
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?1,40,000 + 30% above ?15L
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10%
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Surcharge applicable
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?1,00,00,001 - ?2,00,00,000
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?1,12,500 + 30% above ?10L
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15%
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?1,40,000 + 30% above ?15L
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15%
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|
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?2,00,00,001 - ?5,00,00,000
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?1,12,500 + 30% above ?10L
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25%
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?1,40,000 + 30% above ?15L
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25%
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|
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Above ?5,00,00,000
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?1,12,500 + 30% above ?10L
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37%
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?1,40,000 + 30% above ?15L
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25%
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Capped at 25% under new regime
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Real-Life Tax Comparison: Which Regime Saves More?
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Annual Income
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Deductions Claimed (old Regime)
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Tax Payable (Old Regime)
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Tax Payable (New Regime)
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Better Regime
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?10,00,000
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?3,25,000
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?39,000
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?54,600
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Old Regime
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?15,00,000
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?3,75,000
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?1,56,000
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?1,45,600
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New Regime
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?24,00,000
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?5,25,000
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?3,58,500
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?3,00,000
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New Regime
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Rule of Thumb: If your total deductions > ?3.75L, the Old Regime may save you more. If not, the New Regime offers ease and savings.
Indian Taxpayers:
-Delhi NCR & Mumbai: The older tax setup is often better for those in these areas, thanks to substantial housing allowances and home loan advantages.
-Bangalore & Pune: The revised tax structure is favored by the younger professionals in these cities, as it's simpler.
-NRIs: The new system might be a better fit for NRIs, given their limited local investments and fewer eligible deductions.
2025 Tax Updates:
A ?75,000 Standard Deduction in the New System.
The fresh tax approach is now the default choice nationwide.
Tax Deducted at Source (TDS) will depend on the chosen tax plan.
Those working in cities typically find the new system more convenient.
The Budget 2025 didn't significantly change the income brackets.
How GetMyCA Supports Tax System Selection:
Customized assessments to find tax savings.
Instant analysis of income and potential deductions.
Help with Income Tax Return (ITR) filing for both schemes.
Year-round tax management services.
Guidance on informing your employer about your tax system choice.
In Summary: Make a Well-Informed Choice, Avoid Assumptions
Choosing Between the Old and New Tax System Depends on the Individual:
Old System: Could bring about more savings by utilizing tax deductions and investments.
New System: Offers ease, a higher take-home pay, and fewer prerequisites.
Let GetMyCA assist you in making a smart choice, so you can optimize your savings.
FAQs: Old vs. New Tax Regime (India, FY 2024-2025)
Q: Can I switch tax regimes every year?
A: Yes, if you're salaried. Business professionals can switch only once unless business income ceases.
Q: Which regime is better for high-income earners?
A: Not always the new one. If your deductions are above ?3.75L–?4L, the old regime might still save more.
Q: What happens if I don’t declare my regime to my employer?
A: The New Tax Regime is applied by default for TDS calculation. You can change it at the time of ITR filing.
Q: Are NRIs allowed to opt for both regimes?
A: Yes, NRIs can choose either regime if they meet residential criteria and income thresholds.