Income Tax: 4 key reasons for which you should still opt for the old tax regime | Mint

Budget 2025 introduced a number of changes including the new tax slab rates under the new tax regime wherein taxpayers are not supposed to pay any income tax up to ₹12 lakh a year.

This has undoubtedly made the new tax regime quite tempting for the middle-class taxpayers. In FY 2023-24, around 74 percent of taxpayers opted for the new tax regime. Because of the new changes, there is an expectation that around 90 percent of taxpayers may opt for the new regime next year, CBDT chairperson Ravi Agrawal recently claimed.

With the difference in tax rates growing between the two tax regimes, there are now fewer people who would go for the old tax regime now.

Key reasons for opting for the old tax regime:

1. When you invest in tax-saving instruments:

Although the new tax regime offers concessional tax rates, you stand to lose your entitlement to claim most deductions and exemptions. So, if you have invested large sums in investment instruments such as PPF, NPS and SSY then you may want to opt out of the new tax regime and file your tax return under the old tax regime.

“In case you are opting for a new tax regime, you won’t be eligible for any exemption/deduction available in Income Tax except standard deduction and NPS deduction (employer’s contribution). Deductions under sections 80C, 80D, interest on home loan and HRA are not allowed,” said CA Pratibha Goyal, partner, PD Gupta and Co, a Delhi-based CA firm.

2. When you entitled to HRA

Some salaried employees are entitled to a huge house rent allowance to the tune of ₹1 lakh a month. In such cases, it makes more sense to file returns under the old tax regime.

3. When you fall in high tax bracket

When your annual income is far more than ₹24 lakh, and you fall under the 30 percent tax bracket, which is the same tax rate levied under the old tax regime.

As the income level rises, the savings differential narrows. So, filing returns under the new tax regime may not make much sense for you.

4. Calculator shows lower income

However, if you are still confused as to which regime is apt for you, it is advisable to use the income tax calculator given on the Income Tax department website which reveals the tax computation under both the regimes. And accordingly, you can choose the one which leads to lower tax.

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