The Central Board Of Direct Taxes (CBDT) has introduced a taxpayer-friendly tool to compare taxes under the New Tax Regime for the financial years 2024-25 and 2025-26.
The tool allows individuals to determine which tax regime is more advantageous based on their income and deductions.
CLICK HERE to access the official Income Tax Calculator for FY 2025-26.
Old Tax Regime vs. New Tax Regime: Which One Should You Choose?
Subsequent to the Union Budget on February 1, 2025, taxpayers are now evaluating their tax liabilities under the updated tax slab structure.
One common confusion they faced by the taxpayers is whether to continue with the Old Tax Regime or switch to the New Tax Regime.
The Union Finance Minister, Nirmala Sitharaman in her Budget 2025sppech, announced modifications to the new tax regime, such as the exemption of up to Rs 4 lakh from basic tax. With the recent adjustments to tax slabs and rebate benefits, individuals earning up to Rs 12.75 lakh will now be exempt from tax payments.
However, the old tax regime remains unchanged.
Illustration
Suppose if an individual is earning Rs 15 lakh annually as a salary, let’s compare tax liability in Old Tax Regime & New Tax Regime.
| Particulars | Old Regime | New Regime |
| Income Tax Slab Rates (in Rupees) | 0- 2.5 lakh = 0% 2.5 lakh – 5 lakh = 5% 5 lakh – 10 lakh: 20% Above Rs. 10 lakh: 30% | 0 – 4 lakh = 0% 4 lakh – 8 lakh = 5% 8 lakh – 12 lakh = 10% 12 lakh – 16 lakh = 15% 16 lakh – 20 lakh = 20% 20 lakh – 24 lakh = 25% Above 24 lakh = 30% |
| Calculation of Taxable Income | ||
| Gross salary | Rs. 15,00,000 | Rs 15,00,000 |
| Deductions | Rs 8.25 lakh (including Rs 5.25 lakh + Rs 3 lakh HRA) | Rs. 75,000 |
| Net Taxable Income | Rs 6,75,000 | Rs 14,25,000 |
| Total Tax Payable | Rs. 49,400 | Rs 97,500 |
Tax liability under Old Tax Regime
Under the Old Tax Regime, the tax slabs were structured as follows:
Income up to Rs 2.5 lakh: 0%
Income between Rs 2.5 lakh and Rs 5 lakh: 5%
Income between Rs 5 lakh and Rs 10 lakh: 20%
Income above Rs 10 lakh: 30%
There were various deductions and exemptions available under the old tax regime, including:
Standard Deduction: Rs 50,000
Maximum limit for Section 80C deductions: Rs 1,50,000
Maximum limit for Section 80D deductions: Rs 75,000
Home Loan Interest deduction under Section 24B: Rs 2,00,000
Additional NPS Deduction under 80CCD(1B): Rs 50,000
The total deductions available could amount to Rs 5.25 lakh. Additionally, for a salaried individual with a basic salary of Rs 50,000 and an HRA component of Rs 25,000 per month, the assumed HRA exemption was Rs 3 lakh.
Calculation of Taxable Income:
Gross salary: Rs 15,00,000
Total deductions: Rs 8.25 lakh (including Rs 5.25 lakh + Rs 3 lakh HRA)
Net taxable income: Rs 6.75 lakh
Tax payable under old regime:
Rs 0 – 2.5 lakh: Rs 0
Rs 2.5 lakh – 5 lakh at 5%: Rs 12,500
Rs 5 lakh – 6.75 lakh at 20%: Rs 35,000
Total Tax: Rs 47,500
Cess (4%): Rs 1,900
Final tax liability: Rs 49,400
Tax liability under New Tax Regime
New Tax Slabs under New Tax Regime 2025
0% tax for income between Rs 0 – 4 lakh
5% tax for income between Rs 4 lakh – 8 lakh
10% tax for income between Rs 8 lakh – 12 lakh
15% tax for income between Rs 12 lakh – 16 lakh
20% tax for income between Rs 16 lakh – 20 lakh
25% tax for income between Rs 20 lakh – 24 lakh
30% tax for income above Rs 24 lakh
Deductions and Exemptions (New regime):
Standard Deduction: Rs 75,000 (The only deduction allowed)
Taxable Income Calculation:
Gross Salary: Rs 15,00,000
Less Standard Deduction: Rs 75,000
Net Taxable Income: Rs 14,25,000
Tax Payable Under New Regime:
Rs 0 – 4 lakh: Rs 0
Rs 4 lakh – 8 lakh at 5%: Rs 20,000
Rs 8 lakh – 12 lakh at 10%: Rs 40,000
Rs 12 lakh – 14.25 lakh at 15%: Rs 33,750
Total Tax: Rs 93,750
Cess (4%): Rs 3,750
Final Tax Liability: Rs 97,500
Taxpayers should note:
This comparison highlights that individuals earning Rs 15 lakh per annum can save Rs 48,100 in taxes by opting for the old tax regime, if they are able to utilise all available deductions and claim HRA exemptions.
It is important to note that not all taxpayers may be eligible for these benefits. Specific conditions apply to claiming HRA benefits under Section 10(13A), particularly for those seeking home loan interest deductions under Section 24B.
