Old or new tax regime? A step-by-step guide to choose what's best for you

As the ITR filing season for the financial year 2024-25 (FY25) begins, individual taxpayers need to make an important choice- stick with the default new tax regime or opt for the old one. The new regime offers lower tax rates, but does not allow most tax deductions. On the other hand, the old regime permits popular tax deductions and exemptions under Sections 80C, 80D, HRA, LTA, and more, but comes with comparatively higher slab rates.

 

Who Should Choose What? 

·  Old Regime is ideal for those who:

• Invest in tax-saving instruments (PPF, ELSS, NPS) 
• Claim home loan interest, HRA, LTA, and medical insurance deductions 
• Have a structured salary and financial plan focused on savings

   

·  New Regime is best suited for:

 

• Taxpayers with minimal deductions 
• Individuals with income up to ₹7 lakh, who can benefit from the rebate under Section 87A 
• Those looking for a simplified tax filing process

ALSO READ | Filing tax returns with wrong ITR form can invalidate and delay process   

Step-by-step guide: How to opt for old tax regime 

If you wish to continue with the old tax regime while filing your ITR, here's how to do it:

 

1.    Login to the income tax e-filing portal

Visit incometax.gov.in and log in with your PAN credentials.

   

2.    Start filing your ITR

Select “File Income Tax Return” and choose the assessment year as 2025–26 for income earned in FY25.

   

3.    Choose the correct ITR form

Select the appropriate ITR form based on your income type (usually ITR-1 or ITR-2 for salaried individuals).

   

4.    Navigate to ‘personal information’ section

Within the form, under the ‘Personal Information’ tab, you will find an option asking whether you want to opt out of the new tax regime.

   

5.    Select “Yes” to opt for the old regime

Choose “Yes” when asked if you want to opt for the old tax regime under Section 115BAC(6).

   

6.    Continue with filing and submit before the deadline

Fill in your income details, claim eligible deductions, and complete the process before the deadline (July 31, 2025, for most taxpayers).

 

Switching back to the old tax regime can be financially rewarding for those with planned investments and deductions. Use an online income tax calculator to compare both regimes based on your specific financial profile.