A Study on the Old and New Tax Bill

A Study on the Old and New Tax Bill: Clear all confusions with this guide

Union Budget of 2025 has brought tremendous changes on India’s personal income tax structure. However, the question which comes under the mind of a taxpayer is whether you should opt for the old tax regime or the new tax regime. Making the right choice amongst both the regime can help optimise your tax liability whether you are self-employed or salaried individual. This article will give you in-depth understanding regarding new tax bill and old tax bill. Further, it will cover the latest income tax slabs and can help you decide which regime suits you best.

Table of Content

1. Old Tax Bill vs. New Tax Bill: Which is better after Budget 2025?
2. Major Takeaways from the Union Budget 2025
3. New Tax Bill – Income Tax Slabs (FY 2025–26)
4. Old Tax Bill – Income Tax Slabs (FY 2025–26)
5. Who Gains the Most from the Previous Tax Bill?
6. Who Gains the Most from the New Tax Bill?
7. Conclusion

Old Tax Bill vs. New Tax Bill: Which is better after Budget 2025?

A large segment of middle class got the celebration time as Finance Minister Nirmala Sitharaman brings a significant income tax relief in Union Budget 2025. It brings particularly no income tax burden to the individual earning up to 12.75 lakh. However, this change has also led to an important question for tax payers – Whether they should move to the new tax regime or stay with the old tax regime which has higher deductions and exemptions available that can offer better savings overall.

The significant updates to income tax slabs and rates for FY 2025–26 have been introduced in the new tax regime. This brings up the important question: does the new system actually offer you greater benefits than the traditional one? EY suggests a practical strategy: first, calculate all the exemptions and deductions you can claim under the old regime, and then compare which option results in a lower overall tax liability.

Major Takeaways from the Union Budget 2025

• Zero Tax Threshold up to ₹75 Lakh for Salaried Individuals under New Tax Regime.
• The new tax bill increases the basic exemption limit for individuals up to ₹12 lakh.
• For salaried individuals, a standard deduction of ₹75,000 has been introduced, allowing income of ₹75 lakh tax-free.
• New Income Tax Slab Rates: The revised tax structure comprises seven slabs, beginning with 0% for incomes up to ₹4 lakh and increasing to 30% for incomes exceeding ₹24 lakh.
• Old Income Tax Slabs Remain the Same: The previous tax regime is still in place with these standard rates:
  • 0% up to ₹5 lakh
  • 5% from ₹5 lakh to ₹5 lakh
  • 20% from ₹5 lakh to ₹10 lakh
  • 30% for incomes above ₹10 lakh
• Limited Deductions in the New Regime: This new tax system significantly reduces the availability of traditional tax exemptions and deductions, such as HRA, LTA, Section 80C (investments), and Section 80D (medical insurance). The main relief available is the standard deduction of ₹75,000 for salaried individuals.

New Tax Bill – Income Tax Slabs (FY 2025–26)

Under new tax regime, slabs are structured to offer lower income tax rates across various income ranges.

An additional ₹75,000 standard deduction is available to the salaried individuals, thus raising their zero tax up to ₹12.75 lakh.

Old Tax Bill – Income Tax Slabs (FY 2025–26)

The old tax bill has traditionally retained the same slabs.

However, under the old income tax bill, taxpayers have the facility of still availing important deductions like 80C, 80D, HRA etc. On the other hand, new tax bill has few deductions but still has broader tax slabs and higher exemptions for many.

Who Gains the Most from the Previous Tax Bill?

• People with higher deductions as it may reduce your taxable income that much which is enough to offset the higher income tax rates.
• Those who are earning between ₹12L – ₹24L who can exhaust multiple deductions.
• Salaried person with good amount of HRA or big home loan interest outgo.

Who Gains the Most from the New Tax Bill?

• Salaried people who are earning up to ₹75 lakh and want a zero-tax liability.
• Those who cannot utilise large deductions available under the old tax bill.
• People who require minimal documentation and do not want to submit multiple proofs of rent or investments.
• People who require straightforward slabs with lesser complexities and have few financial commitments to take care of.

Conclusion

The choice between the old and new tax regimes really hinges on your personal situation—factors like your income level, the amount of deductions you’re eligible for, and your long-term financial goals come into play. If you’re someone who benefits greatly from exemptions like HRA, LTA, or 80C investments, the old regime might work better for you. On the other hand, if you prefer a simpler approach with fewer documentation requirements, the new regime with its higher exemption limits could be the way to go. It’s a good practice to reevaluate your tax liabilities at the beginning of each financial year and compare both regimes using your current deductions. This will help you consistently pick the option that maximizes your savings.