Default Tax Regime vs Optional Tax Regime

  Default Tax Regime (New Regime under Section 115BAC) and the Optional Tax Regime (Old Regime) under the Income Tax Act, 1961, updated for AY 2024–25 onwards:

 Default Tax Regime vs Optional Tax Regime

Particulars

Default Tax Regime (New)(Section 115BAC – now default)

Optional Tax Regime (Old)

Status from AY 2024–25

Default regime

Must be opted voluntarily

Tax Slabs (for individuals below 60 yrs)

₹0–3L: Nil₹3–6L: 5%₹6–9L: 10%₹9–12L: 15%₹12–15L: 20%>₹15L: 30%

₹0–2.5L: Nil₹2.5–5L: 5%₹5–10L: 20%>₹10L: 30%

Standard Deduction (Salary/Pension)

✅ ₹50,000 (allowed from AY 2024–25)

✅ ₹50,000 allowed

80C, 80D, 80G, etc. Deductions

❌ Not allowed

✅ Allowed

HRA/Leave Travel Allowance

❌ Not allowed

✅ Allowed

Interest on Home Loan (Self-occupied)

❌ Not allowed

✅ Up to ₹2,00,000 (u/s 24)

Loss from House Property (Inter-head set-off)

❌ Not allowed

✅ Allowed up to ₹2,00,000

Rebate u/s 87A (for income up to ₹7L/₹7.5L)

✅ Full rebate up to ₹7L(₹25,000 rebate up to ₹7.5L)

✅ Full rebate up to ₹5L

Ease of Filing

✔️ Very simple – fewer claims

❌ More documentation

Who Should Prefer

People with no major investments or exemptions

People with deductions & exemptions (like 80C, HRA)

 Illustrative Example: Tax Comparison

Particulars

Old Regime

New Regime

Gross Salary

₹10,00,000

₹10,00,000

Deductions (80C, 80D, etc.)

₹2,00,000

❌ Not allowed

Taxable Income

₹8,00,000

₹10,00,000

Tax Payable (Approx)

₹75,400

₹60,000

 Old Regime better → If deductions > ₹2.5 lakh
 New Regime better → If deductions < ₹2 lakh

 Key Point:

From AY 2024–25 onwards, new regime is the default. If you want to continue with the old regime, you must opt out each year (for non-business income) or file Form 10-IEA (if having business income).

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