New Regime and Old Regime

New Regime and Old Regime

The option to select Old or New Regime was launched in financial year 2020-21 and it has been continued for subsequent years. From financial year 2023-24 the default for all new joiners is New Regime.

Old Regime

If an employee opts for Old Regime the tax slabs and deductions and benefits under various sections of Income Tax act will continue like they were being given till 2019-20. For financial year 2024-25 the tax slabs applicable are given below -
Tax SlabTDS %
CessSurcharge
Upto 2.5 lakhs0%0%0%
2.5 to 5 lakhs5%4%0%
5 to 10 lakhs20%4%0%
10 to 50 lakhs30%4%0%
50 lakhs to 1 crore
30%4%10%
1 crore to 2 crores30%4%15%
2 crores to 5 crores30%4%25%
More than 5 crores30%4%37%

New Regime

The tax slabs applicable for financial year 2024-25 are -
Tax SlabTDS %
CessSurcharge
Upto 3 lakhs0%0%0%
3 to 7 lakhs5%4%0%
7 to 10 lakhs10%4%0%
10 to 12 lakhs15%4%0%
12 to 15 lakhs20%4%0%
15 to 50 lakhs30%4%0%
50 lakhs to 1 crore
30%4%10%
1 crore to 2 crores30%4%15%
More than 2 crores
30%4%25%

The following benefits will be given in the new tax regime -
1. Section 80CCD(2) : any contribution made by the employer in pension fund under this section will continue to be tax free
2. Income from house property : there are significant changes
a) Interest paid under Section 24(b) : only for let out or deemed to let out property, this benefit will not be available for self occupied property
b) Standard deduction under Section 24(a) :  only for let out or deemed to let out property, this benefit will not be available for self occupied property
c) Loss from house income : if after setting off the interest and previous year's loss there is a net loss due to house income the taxable income will not be reduced
d) Carry forward of losses : losses which are not adjusted in the year cannot be carried forward to subsequent years
3. Rebate under section 87A will be of INR 25,000 for Taxable income up to INR 7 lakh, if the taxable income exceeds 7 lakh then there will be no rebate
4. From Financial Year 2024-25 Standard deduction has been increased to INR 75,000

Benefits will not be applicable under new regime are given below
1. Professional Tax
2. Exemption u/s 80C, 80D, 80DDB, 80TTA, 80TTB and others Chapter VI A ( Excluding 80CCD(2))
3. House Rent Allowance
4. Leave Travel Allowance
5. Children Education/Hostel Allowance
6. No additional exemption under section 80EEA and 80EE 

Note : if you have taken a home loan, or have a loss from house property and have invested in NPS under Section 80CCD(1) then old regime will be more beneficial.

Marginal Relief

In Old Regime, marginal relief is given on the surcharge amount which gets applied when the taxable income exceed 50 lakhs, 1 crore, 2 crores or 5 crores. The basis for giving marginal relief on surcharge is that amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs 50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs. The same logic applied to 1 / 2 / 5 crores also.

In New Regime, marginal relief is given under section 87A has been increased to 25,000. EazeWork HRMS automatically calculates and applies the marginal relief.

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