- India,
- 22-Mar-2025 10:20 AM IST
New Tax Structure: Starting April 1, 2025, a new tax structure will come into effect across the country. Under this new system, individuals earning up to ₹12 lakh annually will not have to worry about income tax, provided they opt for the new tax regime. However, the question arises: for those earning more than ₹12 lakh, which option is better—the old tax regime or the new tax regime?
Old vs. New Tax Regime
The old tax regime offers various tax exemptions and deductions, such as:
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Deduction for investments under Section 80C
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Deduction for contributions to NPS (80CCD (1B) and 80CCD (2))
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House Rent Allowance (HRA) exemption
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Deduction for health insurance premium (Section 80D)
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Exemption on savings account interest under Section 80TTA
On the other hand, the new tax regime features simplified tax slabs with only a few available deductions, including:
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Exemption for employer’s NPS contribution under Section 80CCD (2)
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Exemption on telephone and transport allowance
Which Tax Regime is Better for a CTC of ₹25 Lakh?
For an employee with a CTC of ₹25 lakh, a comparison between the old and new tax regimes can help in making an informed decision.
| Details | Old Tax Regime | New Tax Regime |
|---|---|---|
| Total Salary | ₹20,31,900 | ₹20,31,900 |
| Car Lease Perquisite (<1600 CC Engine) | ₹21,600 | ₹21,600 |
| Gross Pay | ₹20,53,500 | ₹20,53,500 |
| Mobile Reimbursement | ₹50,000 | ₹50,000 |
| Conveyance Reimbursement | ₹2,40,000 | ₹2,40,000 |
| Car Leasing Amount | ₹3,00,000 | ₹3,00,000 |
| Net Pay | ₹14,63,500 | ₹14,63,500 |
| LTA Exemption | ₹1,00,000 | ₹0 |
| Standard Deduction | ₹50,000 | ₹75,000 |
| HRA Exemption | ₹2,60,000 | ₹0 |
| Food Coupons | ₹26,400 | ₹0 |
| Taxable Salary | ₹10,27,100 | ₹13,88,500 |
| Section 80C Deduction | ₹1,50,000 | ₹0 |
| Employer’s NPS Contribution | ₹1,00,000 | ₹1,40,000 |
| NPS Deduction (₹50,000) | ₹50,000 | ₹0 |
| Section 80TTA Exemption | ₹10,000 | ₹0 |
| Health Insurance (80D) Deduction | ₹50,000 | ₹0 |
| Net Taxable Salary | ₹6,67,100 | ₹12,48,500 |
| Tax Amount | ₹47,757 | ₹50,440 |
Which Tax Regime Should You Choose?
If an employee can take advantage of various deductions and exemptions, the old tax regime may be more beneficial. However, if one does not utilize these deductions or wants to avoid the complexity of documentation, the new tax regime offers a simpler and more straightforward option.
The key benefit of adopting the new tax system is its simplicity, as it eliminates the need for extensive documentation related to deductions and exemptions. Therefore, before making a decision, individuals should assess their financial situation and investment plans carefully.