Old vs new tax regime: which one saves you more money in ITR filing

A breakdown of deductions, exemptions, savings under the old and new systems will help you manage your finances

India gives people two systems, called regimes, to pay their income tax. The old regime allows you to reduce your taxable income by claiming various deductions and exemptions, like those for insurance premiums, home loan interest, house rent or travel allowance. The new regime, introduced under Section 115BAC, offers lower tax rates but no other benefits besides a few deductions. We explain the key differences between the two regimes and deductions available.

 

Deductions in old tax regime

 

These popular deductions and exemptions are exclusive to the old regime:

 

Section 80C (PPF, EPF, ELSS, life??'insurance premiums) – up to Rs 1.5 lakh per year

 

Section 80D (Health??'insurance premiums) – up to Rs 25,000 (Rs 50,000 for senior??'citizen parents)

 

Section 80E (Education??'loan interest) – 100 per cent of interest paid, no upper limit, for up to eight years

 

Section 80DDB (Medical??'treatment expenses for specified diseases) – as per prescribed limits

 

Section 80GG (Rent paid if you don’t receive HRA) – excess of 10 per cent of total income, capped at Rs 5,000/month or 25 per cent of income

 

Sections 80TTA & 80TTB (Interest on savings bank deposits) – up to Rs 10,000 (and up to Rs 50,000 for seniors)

 

Section 80U (Disability deduction) – Rs 75,000 (Rs 125,000 for severe disability)

 

House rent allowance (HRA) under Section 10(13A) – as per actual rent paid and salary structure

 

Leave travel allowance (LTA) – travel costs for self and family, within India, twice in a block period

 

Deductions permitted under the new tax regime

 

These are the only deductions and exemptions you can claim in the new regime:

 

Standard deduction (Section 16 (ia) – Rs 75,000 for FY 2024??'25

 

Employer’s NPS Contribution (Section 80 CCD (2) – up to 14 per cent of salary

 

Additional employee??'cost deduction (Section 80JJAA) – for new employment, available for three assessment years

 

Agniveer Corpus Fund (Section 80CCH) – amount deposited in the fund

 

Voluntary retirement (Section 10 (10C), gratuity (Section 10(10) and leave encashment (Section 10(10AA) – as per statutory limits

 

Transport allowance (for differently abled persons), conveyance and daily allowances, official perquisites (Section 10(14)) – actuals incurred for duty purposes

 

Gifts up to Rs 50,000 (Section 56(2)(x)) – aggregate value of gifts received

 

Interest on Let??'out Property (Section 24(b)) – as applicable to rental income

 

Which regime should you choose?

 

If you hold sizeable tax??'saving investments, pay health??'insurance premiums, have an education or home loan, or claim HRA/LTA, the old regime typically yields greater savings

 

If you prefer simpler calculations with lower slab rates and can forgo most deductions, the new regime may be more attractive

 

Consult a tax advisor to decide which regime save tax most.