It is essential to learn the difference between the old and new regimes in FY 2024-25 (AY 2025-26) to efficiently reduce your taxable income while the ITRs (Income tax Returns). This newly updated Budget and tax alterations have created confusion in the taxpayer’s mind.
In this blog, we’ll learn the old and new tax regimes, then the difference between them, and then finish with which is better for you. Let’s begin!
Enforced from April 1, 2020 (FY 2020-21), the Indian Government has implemented a new optional tax regime for individuals and Hindu Undivided Families (HUF), wherein tax slabs were altered, and taxpayers have come across with concessional tax rates.
Consequently, Section 115 BAC was added to the Income Tax Act of 1961. However, the new tax regime lacks various deductions and exemptions, including HRA, LTA, 80C, 80D, and more.
Moreover, considering the revisions suggested in the Union Budget 2023, the Income Tax Department has designated the new tax regime as the default one, and taxpayers are required to opt for the old tax regime if they want to use it.
In recent times, the government has made five significant adjustments in Budget 2023 to benefit the taxpayers and encourage them to accept the new regime.
Nirmala Sitharaman has made certain alterations in the tax slab in Budget 2023 and Budget 2024.
| Income Tax Slab (Fiscal Year 2023-24) | Tax Rate | Income Tax Slab (Fiscal Year 2024-25) | Tax Rate |
| Up to ₹3,00,000 | NIL | Up to ₹3,00,000 | NIL |
| ₹3,00,001 to ₹6,00,000 | 5% | ₹3,00,001 to ₹7,00,000 | 5% |
| ₹ 6,00,001 to ₹9,00,000 | 10% | ₹7,00,001 to ₹10,00,000 | 10% |
| ₹ 9,00,001 to ₹12,00,000 | 15% | ₹10,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% | ₹12,00,001 to ₹15,00,000 | 20% |
| More than ₹15,00,000 | 30% | More than ₹15,00,000 | 30% |
The new tax regime offers comparatively lower tax rates for the different income tax slabs. However, it misses various deductions and exemptions which were present in the previous tax regime. You can see that in the table above.
We’ve created a detailed tax slab at the bottom of the article, showcasing a clear difference between the difference in tax rates of the old and new regimes.
In the new tax regime, a total rebate of INR 7 lakhs has been introduced, which means that people earning up to INR 7 lakh don’t need to pay any taxes. The threshold in the previous tax regime was only INR 5 lakh.
The Income Tax Department has set the new tax regime as the default one, and you’ll be required to choose the old one from now on. In simple words, if you don’t inform your employer which regime you want to opt for, then you’ll be taxed according to the new tax rates.
Over INR 5 crores, the surcharge rate has been decreased from 37% in the old tax regime to 25% in the new regime. This new surcharge has effectively reduced the tax rate from 42.74% to 39% for high-net-worth individuals.
For non-government workers, the INR 3 lakh exemption limit on leave encashment has been raised to INR 25 lakhs. It is an 8-fold increase.
As per the new tax regime tax slab, Long-Term Capital Gains (LTCG) benefits are not available anymore over the debt funds invested after 31st March 2023.
According to Budget 2023-24, income earned through traditional insurance policies where the premium exceeds INR 5 lakh will not be tax-free.
The Old Tax Regime refers to the tax system that prevailed before the implementation of the new tax regime. Under the old tax regime, taxpayers can have the benefit of over 70 exemptions and deductions available, including HRA and LTA, allowing them to significantly reduce their taxable income.
For instance, a deduction under Section 80C is a very common deduction, allowing you to reduce the taxable income up to INR 1.5 lakhs. Head to the next section to learn more about the old tax regime.
| Income Tax Slab | Tax Rate |
| Up to ₹2,50,000 | NIL |
| ₹2,50,000 to ₹5,00,000 | 5% |
| ₹5,00,000 to ₹10,00,000 | 20% |
| More than ₹10,00,000 | 30% |
Income Tax old Regime tax slab ranges between 0-30% per annum, based upon different income levels that you can see in the table above.
At the bottom of the article, we’ve created a detailed table showcasing the tax rates on old vs new regimes, allowing you to instantly compare the difference between both and tax the best decision.
The old tax regime offered over 70 different deductions and exemptions, including Section 80C, Section 10(10D), HRA (House Rent Allowance), LTA (Leave Rent Allowance), and more. Using these deductions and exemptions allows you to reduce your taxable income and tax obligations.
Under Section 87A of the old regime, you can get a tax rebate on income up to INR 5 Lakhs.
In the old tax regime, taxpayers can get a deduction of INR 50,000 over their income.
As per the old tax slab regime, taxpayers can easily get the Long-Term Capital Gains (LTCG) benefits over their investments in debt funds.
In this section, we’ve created a completely new table considering the newly altered rates released under Budget 2024.
For more clarification:
| Income Tax Slab | Old Tax Regime | New Tax Regime FY 2023-24 (AY 2024-25) |
| ₹0 to ₹2,50,000 | – | – |
| ₹2,50,001 to ₹3,00,000 | 5% | – |
| ₹3,00,001 to ₹5,00,000 | 5% | 5% |
| ₹5,00,001 to ₹6,00,000 | 20% | 5% |
| ₹6,00,001 to ₹7,50,000 | 20% | 10% |
| ₹7,50,001 to ₹9,00,000 | 20% | 10% |
| ₹9,00,001 to ₹10,00,000 | 20% | 15% |
| ₹10,00,001 to ₹12,00,000 | 30% | 15% |
| ₹12,00,001 to ₹12,50,000 | 30% | 20% |
| ₹12,50,001 to ₹15,00,000 | 30% | 20% |
| ₹15,00,000+ | 30% | 30% |
| Tax Slab | Tax Rate |
| Up to ₹3, 00,000 | NIL |
| ₹3,00,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% + Rs.10,000 |
| More than ₹10,00,000 | 30% + Rs.1,10,000 |
| Tax Slab | Tax Rate |
| Up to ₹5, 00,000 | NIL |
| ₹5,00,001 to ₹10,00,000 | 20% |
| ₹5,00,001 to ₹10,00,000 | 30% + Rs.1,00,000 |
| Income Tax Slab | Old Tax Regime FY 2023-24 (AY 2024-25) | New Tax Regime FY 2023-24 (AY 2024-25) |
| ₹0 to ₹2,50,000 | NIL | NIL |
| ₹2,50,001 to ₹5,00,000 | 5% | 5% |
| ₹5,00,001 to ₹7,50,000 | 20% | 10% |
| ₹7,50,001 to ₹10,00,000 | 20% | 15% |
| ₹10,00,001 to ₹12,50,000 | 30% | 20% |
| ₹12,50,001 to ₹15,00,000 | 30% | 25% |
| More than ₹15,00,000 | 30% | 30% |
NOTE: NRs are also required to pay the surcharge and cess, similar to the case of residents.
| Aspect | Old tax Regime | New Tax Regime (until 31st March 2023) | New Tax Regime (Applicable from 1st April 2023) |
| Income level for rebate eligibility | INR 5 lakh | INR 5 lakh | INR 7 lakhs |
| Standard Deduction | INR 50,000 | • | INR 75,000 (after Budget 2024) |
| Effective Tax-Free Salary income | INR 5.5 lakh | INR 5 lakh | INR 7.5 lakh |
| Rebate u/s 87A | Rs.12,500 | Rs.12,500 | Rs.25,000 |
| HRA Exemption | Yes | No | No |
| Leave Travel Allowance (LTA) | Yes | No | No |
| Other allowances (such as food allowance of Rs.50/meal for two meals a day) | Yes | No | No |
| Entertainment Allowance and Professional Tax | Yes | No | No |
| Perquisites for official purposes | Yes | Yes | Yes |
| Interest on Home Loan u/s 24b on: Self-occupied or vacant property | Yes | No | No |
| Interest on Home Loan u/s 24b on: Let-out property | Yes | Yes | Yes |
| Deduction u/s 80C (FD | PPF | ELSS | LIC | EPF | Children’s tuition fee etc) | Yes | No | No |
| Employee’s (own) contribution to NPS | Yes | No | No |
| Employer’s contribution to NPS | Yes | Yes | Yes |
| Medical insurance premium (under 80D) | Yes | No | No |
| Disabled Individual (under 80U) | Yes | No | No |
| Interest on education loan (under 80E) | Yes | No | No |
| Donation to Political party/trust etc – 80G | Yes | No | No |
| Savings Bank Interest under Section 80TTA and 80TTB | Yes | No | No |
| Other Chapter VI-A deductions | Yes | No | No |
| All contributions to Agniveer Corpus Fund – 80CCH | Yes | No Exist | Yes |
| Interest on Electric vehicle loan – 80EEB | Yes | No | No |
| Deduction on Family Pension Income | Yes | No | Yes |
| Gifts up to Rs 50,000 | Yes | Yes | Yes |
| Exemption on voluntary retirement 10(10C) | Yes | Yes | Yes |
| Exemption on gratuity u/s 10(10) | Yes | Yes | Yes |
| Exemption on Leave encashment u/s 10(10AA) | Yes | Yes | Yes |
| Daily Allowance | Yes | Yes | Yes |
| Conveyance Allowance | Yes | Yes | Yes |
| Transport Allowance for a specially-abled person | Yes | Yes | Yes |
While deciding between the old and new tax regimes, you must consider the exemptions and deductions available under the old tax regime. They not only reduce your tax income but also encourage you to invest for your future. Moreover, once you calculate your net taxable income as per the old tax regime, you will be able to efficiently compare it with the new tax regime.
You must opt for the regime with the lower tax liability. Make sure to inform your employer regarding which tax regime you would like to choose. This will allow them to use the appropriate TDS (Tax Deducted at Source) to deduct your salary.
Do not forget to consider the loss from the house property, capital gains, or business & profession, as it will allow you to make more informed decisions. Hence, choose the regime based on your salary and in which exemptions or deductions you fit.
After certain significant changes made by FM Nirmala Sitharaman, everyone is getting a little confused regarding how they need to file their taxes. This blog has very simply clarified both the new tax regime and the old tax regime, and it will help you decide which regime is better in your case. We hope this guide helps you understand everything you need to know about the new tax regime after the Budget 2024.
Also Read : Union Budget 2024-25: Key Highlights
For a very long time, taxpayers were demanding an increase in the tax slabs and a lowering of the tax rates. Thus, the Indian government has introduced a new tax regime to reduce the tax rates. However, they have also eliminated 70 out of the 100 exemptions to simplify the tax filing procedure. Moreover, tax authorities have kept it optional for taxpayers to choose between the old and new tax regimes and choose the one that benefits them the most.
Under the new tax regime, 70 out of the 100 exemptions are removed, leaving taxpayers to not be able to implement them. Below, we’ve mentioned some of the most populous exemptions that are not available anymore in the new tax regime.
Here’s the list of deductions and exemptions available under the new tax regime:
Yes, employees can switch between the old and new tax regimes every year before filing the ITR (Income tax Returns).
No, HRA (House Rent Allowances), LTA (Leave Travel Allowance), and other entertainment allowances are not allowed in the new tax regime.
The old tax regime is a better option for senior citizens; they generally have multiple sources of income, including pension, interest income, rental income, etc. Using the old tax regime allows them to utilize various deductions such as 80C, 80TTB, 80D, and more. However, it is better to calculate your tax liability under both regimes and then select the befitting based on your investment portfolio and long-term investing.
Here’s the list of benefits of the new tax regime: