Budget 2025: New tax regime vs. old tax regime – which one should you now opt for?

Union Budget 2025: With income tax slabs becoming more attractive, it is quite tempting for the taxpayers now to choose a new tax regime over the old tax regime.

Today, Finance MinisterNirmala Sitharaman duringBudget 2025 speech announced the new tax slabs, thus offering benefits of tax saving for taxpayers. There will be no income tax for salariedtaxpayers earning upto ₹12.75 lakh, for example.

Sample this: If your income is ₹12.75 lakh, income tax in the new tax regime is 0 whereas in the old regime tax would be ₹1.8 lakh.

When income is ₹15.75 lakh, tax under the new tax regime would be ₹1.05 lakh while old tax regime would raise your tax burden to ₹2.7 lakh.

Finally, when your income is ₹25.75 lakh, your tax outgo would be ₹3.3 lakh whereas the same calculation for old regime would amount to ₹5.7 lakh. (These calculations are based on the assumptions that taxpayer has not made any investment)

Tax slabs under the old regime

Tax slabs under the new tax regime (new)

What experts say

The key difference between the old and new tax regime is that the old regime allows taxpayers to claim tax deductions for investments made in various savings instruments such as PPF, NSC, insurance premium and NPS whereas the new regime – while offering concessional tax rates – deprives you from these.

And with the rates becoming even more concessional, it is a no brainer for those who do not invest in these instruments, while on the other hand – those taxpayers who are invested into these schemes, it is subject to a number of factors such as income bracket they fall under and whether they are entitled to claim HRA.

Experts say that the new tax regime will now offer more savings but if someone falls in the high-income bracket and has an HRA and rental claims then the old regime is still better.

“If you have an annual income of say ₹40 lakh and up to ₹12 lakh of HRA, then the old regime is still beneficial,” says CA Chirag Chauhan, a Mumbai based chartered accountant.

While sharing his thoughts on the tax savings, CA Paras Gangwal, founder of ThetaVegaCapital says “If your income is ₹25 lakh under the old tax regime, you would pay ₹4.4 lakh in taxes. But under the revised new regime, it is just ₹3.3 lakh – saving ₹1.1 lakh. Lower tax rates mean more savings for high earners. Switch wisely,” he says.

“Tax Rebate which is currently ₹25,000 has been raised to ₹60,000 in the new tax regime. For salaried persons, there will be no income tax upto ₹12.75 lakh because there is a standard deduction of ₹75,000,” said CA Pratibha Goyal, partner of PD Gupta & Company, a Delhi-based firm.