Old vs New Tax Regime

With Budget 2025's major tax changes now in effect, I'm seeing a lot of confusion about which regime to choose. Here are answers to the most common questions:

Q1: What's the biggest change in Budget 2025?

Income up to ₹12.75 lakh is now completely tax-free under the new regime for salaried individuals! This includes the increased Section 87A rebate (₹60,000) plus the standard deduction (₹75,000).

Q2: What are the new tax slabs for FY 2025-26?

New Regime:

• Up to ₹4L: Nil

• ₹4L-₹8L: 5%

• ₹8L-₹12L: 10%

• ₹12L-₹16L: 15%

• ₹16L-₹20L: 20%

• ₹20L-₹24L: 25%

• Above ₹24L: 30%

Old Regime: (unchanged)

• Up to ₹2.5L: Nil

• ₹2.5L-₹5L: 5%

• ₹5L-₹10L: 20%

• Above ₹10L: 30%

Q3: Who should stick with the OLD regime?

✅ If you have substantial deductions totaling ₹3-5 lakh or more:

• High HRA claims

• Home loan interest (Section 24b)

• Multiple Section 80C investments (₹1.5L)

• Section 80D health insurance

• Education loan interest (80E)

• NPS contributions (80CCD)

Example: Earning ₹25L with ₹9L in deductions? Old regime saves you ₹15,600!

Q4: Who should switch to the NEW regime?

✅ If you:

• Earn up to ₹12.75L (zero tax!)

• Have minimal investments/deductions

• Want simplified filing with no documentation

• Prefer higher take-home salary over tax planning

Example: Earning ₹12L with ₹1.8L in deductions? New regime gives you ZERO tax liability!

Q5: Can I switch between regimes every year?

Salaried employees: Yes, you can switch annually when filing your ITR.

Business income earners: Must file Form 10-IEA to opt out of new regime. Choice is more restricted.

Q6: What deductions are NOT available in the new regime?

❌ HRA exemption ❌ LTA (Leave Travel Allowance) ❌ Section 80C (except employer NPS) ❌ Section 80D (health insurance) ❌ Home loan interest deduction ❌ Section 80E (education loan)

✅ What's still available:

• Standard deduction (₹75,000)

• Employer NPS contribution

Q7: I earn ₹15-20 lakhs. Which regime is better?

It depends on your deductions!

• Low deductions (<₹2L): New regime is likely better

• High deductions (>₹4L): Calculate both—old regime might still win

• Middle ground: Use a tax calculator to compare

Q8: Is the new regime really "default" now?

Yes! For FY 2025-26, the new regime is the default. You must actively opt for the old regime if you want to use it. Make this choice carefully before filing.

Q9: What's the bottom line?

New regime wins for: Middle-income earners (up to ₹15L) with limited tax-saving investments

Old regime wins for: Those with significant deductions, HRA, or home loans

Pro tip: Always calculate your tax liability under BOTH regimes before deciding. What worked last year might not be optimal this year!

💡 Need help deciding? Calculate your tax under both scenarios. The regime that gives you lower tax liability is your winner—it's that simple.

What regime are you choosing this year? Drop a comment below! 👇

#IncomeTax #TaxPlanning #Budget2025 #FinancialPlanning #TaxRegime #IndianTaxes #FinanceTips