Old vs New Tax Regime: Which One Should You Choose?

Choosing between the old and new tax regimes can be confusing for employees. Let’s break it down clearly—with recent updates—to help you decide which suits you best.

What Changed Recently?

1. Under the new tax regime, standard deduction increased from ₹50,000 to ₹75,000 from FY 2024-25.¹
2. The rebate limit (Section 87A) rose dramatically:
   1. Up to ₹7 lakh in FY 2024-25 for the new regime (₹25,000 rebate)²
   2. Up to ₹12 lakh in FY 2025-26 (₹60,000 rebate)³
3. New regime basic exemption slabs have been widened: up to ₹4 lakh for FY 2025-26⁴

Old Regime: Know the Perks

1. Offers multiple deductions (Section 80C, 80D, HRA, etc.).
2. ₹50,000 standard deduction still available.
3. Full rebate (₹12,500) if taxable income ≤ ₹5 lakh under section 87A.
4. More paperwork, but powerful if you:
   1. Invest heavily (PF, rent, child education).
   2. Claim multiple exemptions.

New Regime: Simpler, Cleaner

1. Higher standard deduction (₹75,000).
2. Zero tax up to ₹7 lakh (FY 2024-25); up to ₹12 lakh in FY 2025-26 due to rebate.⁵
3. Slabs start at 5%, 10%, 15%, etc., with minimal documentation.
4. Great for employees with fewer deductions and those preferring simplicity.

So Which One is Right for You?

1. Choose Old Regime if:
   1. You claim 80C (PF, ELSS), HRA, 80D, or other exemptions.
2. Choose New Regime if:
   1. Your gross taxable income is below ₹12 lakh, or
   2. You prefer fewer deductions and a simpler process.

Try Both Before You Decide

1. Run your salary through both regimes.
2. Add up investments, exemptions, and salary structure.
3. Make a side-by-side comparison.
4. See which offers you better savings.
5. At your income level, you may find the new regime more beneficial—thanks to higher deductions and rebates.

How Zeba Can Help

1. Tax regime chooser: compare both regimes with ease.
2. Collect investment proofs and CPI directly in-app.
3. Auto update payroll based on chosen regime—for error-free TDS.

Final Takeaway

New regime offers simplicity and zero tax up to ₹12 lakh for FY 2025-26—ideal if your deductions are limited. Old regime still wins when you use traditional exemptions and investments.

With smart tools like Zeba, choosing the right regime becomes effortless. Want a detailed comparison or demo? Just let us know!

Looking for help comparing regimes or optimizing your payroll? Visit Zeba.pro for a free walkthrough.

Sources

1. incometax.gov.in, pnbmetlife.com, indiafilings.com, cleartax.in
2. wikipedia.org, tax2win.in, policybazaar.com, taxbuddy.com
3. pnbmetlife.com, a2ztaxcorp.net, tax2win.in
4. cleartax.in, economictimes.com, a2ztaxcorp.net
5. wikipedia.org, indiafilings.com, taxbuddy.com, policybazaar.com