If you are a salaried employee, calculating your taxable income and selecting the right tax regime is very important while filing your Income Tax Return
Nidhi | Aug 5, 2025 |
ITR Filing 2024-25: Old Tax Regime Vs New Tax Regime
If you are a salaried employee, calculating your taxable income and selecting the right tax regime is very important while filing your Income Tax Return. This can have a major impact on your tax liability. Let us understand which regime can be beneficial based on the comparison between the old tax regime and the new tax regime. But first, it is important to understand how your taxable salary is calculated.
Before filing your income tax return, it is essential to know how to calculate taxable salary. The salary income must be calculated as follows:
| Particulars | Amount |
| Basic Salary | Rs XXX |
| Add: Allowances | Rs XXX |
| Add: Perquisites | Rs XXX |
| Add: Profit in Lieu of Salary | Rs XXX |
| Add: Retirement Benefits | Rs XXX |
| Add: Pension | Rs XXX |
| Less: Deductions | |
| a) Entertainment Allowance (if govt employee) | (Rs XXX) |
| b) Employment/Professional Tax | (Rs XXX) |
| c) Standard Deduction | (Rs XXX) |
| Taxable Salary Income | Rs XXX |
Taxpayers are required to pay income tax according to a slab system. This means the more you earn, the higher the percentage of tax you have to pay. Under the old tax regime, the slab rates are divided into three categories:
| Total Income | Tax Rate | ||
| Normal resident | Senior Citizen | Super Senior Citizen | |
| Up to Rs 2.5 lakh | Nil | Nil | Nil |
| Rs 2.5 lakh to Rs 3 lakh | 5% | Nil | Nil |
| Rs 3 lakh to Rs 5 lakh | 5% | 5% | Nil |
| Rs 5 lakh to Rs 10 lakh | 20% | 20% | 20% |
| Above Rs 10 lakh | 30% | 30% | 30% |
The tax rates in the new tax regime are the same for all categories of individuals.
| Total Income (Rs) | Rate |
| Upto 3,00,000 | Nil |
| From 3,00,001 to 7,00,000 | 5% |
| From 7,00,001 to 10,00,000 | 10% |
| From 10,00,001 to 12,00,000 | 15% |
| From 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
The rebate under Section 87A provides tax relief to resident individuals whose income falls under lower income brackets.
If your income is above Rs 7,00,000 and the tax is more than the extra income you earned, you get a rebate, so you do not pay more tax than the extra amount you earned.
When the income exceeds a certain limit, additional tax is charged over and above the existing tax rates. This additional charge is known as a Surcharge. Here are the rates of Surcharge for different income limits:
| Nature of Income | Up to Rs 50 lakhs | More than Rs 50 lakhs but up to Rs 1 crore | More than Rs 1 crore but up to Rs 2 crores | More than Rs 2 crores but up to Rs 5 crores | More than Rs 5 crores |
| Short-term capital gain covered under Section 111A or Section 115AD | Nil | 10% | 15% | 15% | 15% |
| Long-term capital gain covered under Section 112A or Section 115AD or Section 112 | Nil | 10% | 15% | 15% | 15% |
| Dividend income (not charged under sections 115A, 115AB, 115AC, 115ACA) | Nil | 10% | 15% | 15% | 15% |
| Unexplained income under Section 115BBE | 25% | 25% | 25% | 25% | 25% |
| Any other income (if opted for old tax regime) | Nil | 10% | 15% | 25% | 37% |
| Any other income (if opted for new tax regime under Section 115BAC) | Nil | 10% | 15% | 25% | 25% |
Every taxpayer is required to pay health and education cess at the rate of 4% on the amount of income tax plus surcharge.
Here are the Exemptions and Deductions Under the Old Tax Regime and the New Tax Regime
| Year | FY 2025-26 | FY 2024-25 | FY 2024-25 |
| Particulars | New Tax Regime | New Tax Regime | Old Tax Regime |
| Rebate | 1200000 | 700000 | 500000 |
| Rebate on STCG 111A | Not Available | Not Available | Available |
| Rebate on LTCG 112A | Not Available | Not Available | Not Available |
| Standard Deduction | 75000 | 75000 | 50000 |
| House Rent Allowance (HRA) | Not Available | Not Available | Available |
| Leave Travel Allowance (LTA) | Not Available | Not Available | Available |
| 30% Additional Employee Cost (Section 80 JJAA) | Available | Available | Available |
| Food Allowance | Not Available | Not Available | Available |
| Professional Tax | Not Available | Not Available | Available |
| Reimbursement of Office Expense | Available | Available | Available |
| Home Loan Interest (Rent) | Available | Available | Available |
| Home Loan Interest (Self Occupied) | Not Available | Not Available | Available |
| LIC/ PF/ PPF (Section 80C) | Not Available | Not Available | Available |
| NPS Employee Contribution | Not Available | Not Available | Available |
| NPS Employer Contribution | Available (14% for all) | Available (14% for all) | Available (12% Non-Govt and 14% Govt) |
| Mediclaim (Section 80D) | Not Available | Not Available | Available |
| Disabled Individual (Section 80U) | Not Available | Not Available | Available |
| Education Loan (Section 80E) | Not Available | Not Available | Available |
| EV Loan (Section 80EEB) | Not Available | Not Available | Available |
| Political/Trust Donation (Section 80G/ 80GGC) | Not Available | Not Available | Available |
| Savings Bank Interest (Section 80TTA/ 80TTB) | Not Available | Not Available | Available |
| Family Pension Deduction | 25000 | 25000 | 15000 |
| VRS Exemption (Section 10(10C)) | Available | Available | Available |
| Gratuity Exemption (Section 10(10)) | Available | Available | Available |
| Leave Encashment (Section 10(10AA)) | Available | Available | Available |
| Transport for specially-abled | Available | Available | Available |
Your choice between the old and new tax regime depends on the deductions you can claim.
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