The Indian income tax system offers two regimes: the Old Tax Regime (with deductions) and the New Tax Regime (with lower rates but fewer deductions). Here’s a detailed comparison of allowed deductions in FY 2024-25 under both systems.
1. Key Differences Between Old & New Tax Regimes
Feature | Old Tax Regime (Section 115BAC) | New Tax Regime (Default from FY 2024-25) |
Deductions Allowed | Yes (Multiple under Chapter VI-A) | Very Limited (Only a few) |
Tax Slabs | Higher rates | Lower rates |
Best For | Those with high investments & deductions | Salaried with minimal deductions |
Mandatory? | Optional (Can choose) | Default (Must opt-out for old regime) |
2. Deductions Allowed Under Old Tax Regime (FY 2024-25)
A. Standard Deduction
- ₹50,000 for salaried individuals & pensioners.
B. Section 80C (₹1.5 Lakh)
- PPF, EPF, ELSS, NSC, Tax-saving FDs
- Life Insurance Premiums (LIC, etc.)
- Principal Repayment of Home Loan
- Tuition Fees (for 2 children)
- 5-Year Tax-Saving Bank FDs
C. Section 80D (Medical Insurance)
- Self/Family: ₹25,000 (₹50,000 for seniors)
- Parents: ₹25,000 (₹50,000 if senior citizens)
D. Section 80CCD(1B) (NPS Additional Deduction)
- ₹50,000 (Extra beyond ₹1.5 lakh under 80C)
E. House Rent Allowance (HRA)
- Tax exemption for rent paid (if HRA is part of salary).
F. Section 24(b) (Home Loan Interest Deduction)
- ₹2 lakh for self-occupied property.
- No limit for let-out property.
G. Section 80E (Education Loan Interest)
- Full interest deduction for 8 years.
H. Section 80G (Donations)
- 50% or 100% deduction for donations to NGOs, PM Relief Fund, etc.
I. Section 80TTA/TTB (Interest Income)
- ₹10,000 (Savings A/c – 80TTA)
- ₹50,000 (Senior Citizens – 80TTB – FD Interest)
3. Deductions Allowed Under New Tax Regime (FY 2024-25)
A. Standard Deduction (₹50,000)
- Available for salaried employees & pensioners.
B. Employer’s NPS Contribution (Sec 80CCD(2))
- Up to 10% of salary (for salaried).
C. Deduction for Agniveer Fund (New in Budget 2024)
- Contributions to Agniveer Corpus Fund are deductible.
D. Family Pension Deduction (Sec 57(iia))
- ₹15,000 or 1/3rd of pension (whichever is lower).
Not Allowed in New Regime:
- No HRA exemption
- No 80C (PPF, LIC, ELSS, etc.)
- No home loan interest deduction (Section 24)
- No medical insurance (80D)
- No NPS extra ₹50,000 (80CCD(1B))
4. Which Regime is Better?
Choose Old Regime If:
✔ You have high investments (LIC, PPF, ELSS, Home Loan, etc.)
✔ You claim HRA, medical insurance, or education loan benefits.
✔ Your total deductions exceed ₹3-4 lakh.
Choose New Regime If:
✔ You have minimal investments & deductions.
✔ You are a salaried employee with no home loan/HRA.
✔ Your taxable income is below ₹7.5 lakh (rebate benefit).
5. Tax Slabs Comparison (FY 2024-25)
Income Range Old Regime Rate New Regime Rate
₹3-6 lakh 5% 5%
₹6-9 lakh 20% 10%
₹9-12 lakh 20% 15%
₹12-15 lakh 30% 20%
Above ₹15 lakh 30% 30%
6. Old vs New Regime?
- Old Regime = More deductions, higher tax rates.
- New Regime = Fewer deductions, lower tax rates.
Example:
- If your deductions exceed ₹3.5 lakh, Old Regime may save more tax.
- If you don’t have many deductions, New Regime is better.
Conclusion
The best regime depends on your investments, deductions, and income level. Use an income tax calculator to compare both before filing ITR.