What Is the New Tax Regime in India?
What Is the New Tax Regime in India?
Complete Guide for FY 2024–25 and FY 2025–26
Introduced as a part of India’s tax reform strategy, the New Tax Regime offers an alternative to the traditional (old) tax system. It aims to simplify tax filing by offering lower tax rates with no or limited exemptions.
But what exactly is the new tax regime? Who should opt for it? And how does it differ from the old regime?
In this article, we’ll break down everything you need to know about the New Income Tax Regime—updated for FY 2024–25 and FY 2025–26.
📘 What Is the New Tax Regime?
The New Tax Regime, introduced in Budget 2020, is a simplified tax structure under Section 115BAC of the Income Tax Act. It offers:
• Reduced tax rates across income slabs
• No deductions or exemptions under Sections like 80C, 80D, HRA, LTA, etc.
• Faster and easier tax calculation
From FY 2023–24, it has been made the default regime unless you opt for the old one.
📊 New Tax Regime Slabs (FY 2024–25 Onwards)
| Annual Income | Tax Rate |
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
💡 Standard deduction of ₹50,000 is now allowed even under the new regime (previously it was not).
💡 For FY 2025–26, as per the proposed new tax bill, the basic exemption limit will be raised to ₹4,00,000, and the standard deduction increased to ₹75,000 (to be effective from FY 2026–27).
🧾 Key Features of the New Tax Regime
• ✅ Lower tax rates
• ❌ No deductions under 80C, 80D, HRA, LTA, etc.
• ✅ Standard deduction of ₹50,000 (now applicable)
• ✅ Section 87A rebate up to ₹7 lakh (Zero tax liability)
• ✅ Quick and paperless filing
• ❌ No exemptions for house rent allowance, interest on home loan (self-occupied property)
🧮 Who Should Choose the New Tax Regime?
The new regime works best for those who:
• Don’t invest heavily in tax-saving instruments
• Don’t claim HRA or housing loan interest
• Are freelancers or gig workers
• Prefer simplicity over strategic tax planning
✅ If your total deductions under the old regime are below ₹2.5 lakh, the new regime may save you more tax.
🤝 Old Regime vs New Regime – Quick Comparison
| Feature | Old Regime | New Regime (Default) |
| Basic Exemption Limit | ₹2.5L – ₹3L – ₹5L | ₹3L (to be ₹4L in future) |
| Tax Slabs | Fewer slabs | Multiple slabs (5% to 30%) |
| Deductions Allowed | ✅ Yes | ❌ Limited |
| Standard Deduction | ₹50,000 | ✅ ₹50,000 (₹75,000 from FY 2026–27) |
| Tax Planning Flexibility | High | Low |
| Filing Simplicity | Moderate | High |
⚠️ Important Notes
• If you're a business or professional, you need to opt in or opt out of the new regime via Form 10-IEA (from AY 2024–25 onwards).
• Salaried individuals can switch between regimes every year while filing ITR.
Final Words
The New Tax Regime is a simplified, low-compliance alternative for Indian taxpayers. With competitive tax rates and fewer documentation hassles, it's ideal for those who don’t fully utilize deductions.
However, if you’re someone who invests smartly for tax-saving, the old regime may still work better.
Thinking of switching to the new tax regime?
Our experts help you compare both regimes and choose what’s best for your income and savings.
👉 https://callmyca.com/business-tax-filing
