With changes in the new tax regime for FY 2025-26, many taxpayers are unsure which option to choose. Our experts have prepared a comprehensive comparison to help you make the right decision.
Choosing between the Old Tax Regime and the New Tax Regime has become an annual dilemma for salaried individuals. With the recent tweaks introduced in Budget 2025, the new regime has become the default and, for many, the more lucrative option. However, it’s not a one-size-fits-all solution.
The Case for the New Regime
The New Regime offers lower tax rates across broader income slabs. If you are a young professional with fewer financial liabilities (no home loan, limited life insurance premiums), the new regime is almost certainly better. For income up to ₹8 Lakhs, your tax liability under the new regime is effectively zero.
When the Old Regime Still Makes Sense
The Old Regime requires you to claim deductions to lower your taxable income. You should stick to the old regime if you are claiming major deductions, such as:
- Section 80C (PPF, ELSS, LIC) up to ₹1.5 Lakh
- Section 24(b) Home Loan Interest up to ₹2 Lakh
- HRA (House Rent Allowance)
- Health Insurance Premiums (Section 80D)
The Break-Even Point
As a rule of thumb, if your total eligible deductions exceed ₹3.75 Lakhs, the Old Regime usually results in lower taxes. If your deductions are below ₹2.5 Lakhs, the New Regime is highly favorable.
We advise calculating your exact tax outgo under both regimes before filing your declaration with your employer. Reach out to us for a personalized tax projection.
