New vs Old Tax Regime India FY 2024-25: Which Saves You More Tax?
Budget 2024 made the new tax regime the default for salaried employees — but the old regime still saves more money for people with significant deductions. This guide explains both regimes in full, with worked examples at ₹8L, ₹12L, and ₹20L income, and a clear framework for choosing the right option.
What Changed in Budget 2024
The Union Budget 2024 made significant changes that tipped the balance further toward the new tax regime for many salaried taxpayers:
- Standard deduction raised to ₹75,000 under the new regime (up from ₹50,000) for salaried employees and pensioners.
- Family pension deduction raised from ₹15,000 to ₹25,000 under the new regime.
- New regime is now the default — employers will apply new regime TDS unless you explicitly opt for the old regime by submitting a declaration.
- LTCG and STCG rates revised: LTCG on equity is now 12.5% (up from 10%); STCG is 20% (up from 15%).
The old regime standard deduction remains at ₹50,000 and was not changed in Budget 2024.
Tax Slabs Comparison: New vs Old Regime
New Tax Regime (FY 2024-25)
| Taxable income | Tax rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Section 87A rebate: If your taxable income is ₹7L or below under the new regime, you pay zero tax (₹25,000 rebate wipes out the tax liability entirely). This effectively makes the new regime tax-free up to ₹7.75L for salaried employees (₹7L + ₹75,000 standard deduction).
Old Tax Regime (FY 2024-25)
| Taxable income | Tax rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The old regime has higher rates in the ₹5L–₹10L range (20% vs 10% in new regime) but allows a long list of deductions that can significantly reduce taxable income.
Key Deductions Available Only in the Old Regime
The new regime removes most deductions and exemptions. These are the major ones you lose when you switch:
| Deduction | Section | Max limit |
|---|---|---|
| PPF, ELSS, LIC, NSC, home loan principal | 80C | ₹1,50,000 |
| NPS employee contribution | 80CCD(1) | ₹50,000 extra |
| Health insurance premium | 80D | ₹25,000–₹50,000 |
| Home loan interest (self-occupied) | 24(b) | ₹2,00,000 |
| HRA exemption | 10(13A) | Actual HRA received or formula |
| LTA (Leave Travel Allowance) | 10(5) | Actual travel costs |
| Standard deduction (salaried) | 16(ia) | ₹50,000 |
| Education loan interest | 80E | Entire interest (8 years) |
The new regime does retain a few deductions: employer NPS contribution (80CCD(2), up to 10% of salary), Agniveer corpus fund (80CCH), and the ₹75,000 standard deduction for salaried employees.
Worked Examples: Which Regime Wins?
Example 1: ₹8L CTC, Minimal Deductions
Assume: No HRA exemption (company flat), ₹1.5L in 80C, no home loan.
New regime: ₹8L CTC − ₹75K standard = ₹7.25L taxable
Tax: 5% on ₹4L (₹3L–₹7L) = ₹20,000 + 10% on ₹25K = ₹2,500 = ₹22,500
+ 4% cess = ₹23,400 total
Old regime: ₹8L − ₹50K standard − ₹1.5L (80C) = ₹6L taxable
Tax: 5% on ₹2.5L = ₹12,500 + 20% on ₹1L = ₹20,000 = ₹32,500
+ 4% cess = ₹33,800 total
✓ New regime saves ₹10,400 at this income level.
Example 2: ₹12L CTC, Metro City, Home Loan
Assume: HRA ₹2L exempt, 80C ₹1.5L, home loan interest ₹2L (24b), 80D ₹25K.
Old regime deductions: ₹50K + ₹2L (HRA) + ₹1.5L (80C) + ₹2L (24b) + ₹25K (80D) = ₹6.25L
Taxable: ₹12L − ₹6.25L = ₹5.75L
Tax: 5% on ₹2.5L = ₹12,500 + 20% on ₹75K = ₹15,000 = ₹27,500 + cess = ₹28,600
New regime: ₹12L − ₹75K = ₹11.25L taxable
Tax: 5% on ₹4L + 10% on ₹3L + 15% on ₹1.25L = ₹20K+₹30K+₹18.75K = ₹68,750 + cess = ₹71,500
✓ Old regime saves ₹42,900 for this high-deduction scenario.
Example 3: ₹20L CTC, Moderate Deductions
Assume: HRA ₹1.5L exempt, 80C ₹1.5L, no home loan.
Old regime: ₹20L − ₹50K − ₹1.5L (HRA) − ₹1.5L (80C) = ₹16.5L taxable
Tax: ₹1.125L (up to ₹10L) + 30% on ₹6.5L = ₹1.95L → total ₹3.075L + cess = ₹3.2L
New regime: ₹20L − ₹75K = ₹19.25L taxable
Tax: ₹1.5L (up to ₹15L) + 30% on ₹4.25L = ₹1.275L → total ₹2.775L + cess = ₹2.886L
✓ New regime saves ₹31,400 at ₹20L even with moderate old-regime deductions.
The Break-Even Deduction Rule
A practical way to decide: calculate your total old-regime deductions. If they exceed a certain threshold, the old regime wins. These approximate break-even points are based on ₹75K vs ₹50K standard deduction gap:
| Annual CTC | Old regime wins if deductions exceed |
|---|---|
| Up to ₹7L | Old regime rarely wins (new regime is tax-free via 87A) |
| ₹8L – ₹10L | ~₹2.5L – ₹3L total deductions |
| ₹10L – ₹15L | ~₹3.5L – ₹4L total deductions |
| ₹15L – ₹20L | ~₹4.5L – ₹5.5L total deductions |
| Above ₹20L | Depends heavily on HRA city and home loan interest |
How to Switch Regimes
- Salaried employees: Submit Form 12BAA to your employer to declare your preferred regime at the start of each financial year. You can switch every year.
- Business owners/self-employed: Can switch from new to old regime only once. Once you move back to the old regime, you cannot switch to new again except in the year you have no business income.
- When filing ITR: If you missed declaring to your employer, you can still choose your preferred regime when filing your ITR (before the due date of July 31). After filing, the choice cannot be changed for that year.
Bottom Line: How to Decide
- List all your deductions: HRA exemption + 80C + 24(b) home loan interest + 80D health insurance + NPS + others.
- Add them up. If your total deductions (excluding standard deduction) exceed ₹3.5L–₹4.5L for most income levels, the old regime saves more.
- If your income is below ₹7.75L (after standard deduction of ₹75K), choose the new regime — you pay zero tax.
- If you have a large home loan in a metro city, the old regime almost always wins at ₹10L–₹20L income.
Calculate your exact tax under both regimes
Use our Income Tax Calculator to enter your actual income and deductions and see the exact tax under both regimes side by side.
Open Income Tax Calculator →This guide is for educational purposes. Tax calculations depend on individual circumstances. Consult a Chartered Accountant for personalised advice. Sources: CBDT Budget 2024 circular, Income Tax Act 1961 (as amended).