New regime or old? The one mistake salaried taxpayers are making before filing returns
For the current filing (FY 2024–25), the old regime—despite being less promoted—can lead to significantly lower tax bills, especially for those with investments, insurance, or housing expenses.
- Jul 28, 2025,
- Updated Jul 28, 2025 8:36 AM IST
With the September 15, 2025, ITR deadline fast approaching, many taxpayers could end up paying more tax than necessary—just by choosing the default option. The new tax regime may look attractive, but for most salaried individuals in FY 2024–25, it might not be the smarter choice.
A common misconception is driving costly mistakes: many believe the new tax regime’s headline benefit—no tax on income up to ₹12 lakh—applies immediately. It doesn’t. That change takes effect from April 1, 2025, meaning it will only benefit taxpayers next year, when they file for FY 2025–26.
For the current filing (FY 2024–25), the old regime—despite being less promoted—can lead to significantly lower tax bills, especially for those with investments, insurance, or housing expenses.
Here’s how it breaks down: If your gross income is ₹15 lakh, you need around ₹4 lakh in total deductions for the old regime to beat the new one. At ₹20 lakh or more, deductions above ₹4.5 lakh tip the scales. Even at incomes between ₹7–10 lakh, deductions of just ₹3 lakh can make the old regime more beneficial.
And most salaried taxpayers reach those levels without even trying. Between Section 80C (₹1.5 lakh), health insurance under 80D, home loan interest under 24(b), HRA exemptions, and the ₹50,000 standard deduction (available under both regimes), deductions often stack up fast.
The problem? Too many filers opt into the new regime without doing the math—because it’s now the default option.
It’s critical to remember: the new regime offers lower tax rates but removes nearly all deductions (except the standard ₹50,000). That works if you haven’t claimed much—but if you’ve invested or pay rent, the old regime still wins hands down.
The government’s tax reforms were designed to simplify the process, not to force taxpayers into higher bills. Yet unless you actively choose the old regime, you could end up doing exactly that.
Before you click submit, total your deductions. Use a tax calculator. If the old regime saves you more, opt in explicitly. Because in FY 2024–25, letting the system choose for you could cost you.
With the September 15, 2025, ITR deadline fast approaching, many taxpayers could end up paying more tax than necessary—just by choosing the default option. The new tax regime may look attractive, but for most salaried individuals in FY 2024–25, it might not be the smarter choice.
A common misconception is driving costly mistakes: many believe the new tax regime’s headline benefit—no tax on income up to ₹12 lakh—applies immediately. It doesn’t. That change takes effect from April 1, 2025, meaning it will only benefit taxpayers next year, when they file for FY 2025–26.
For the current filing (FY 2024–25), the old regime—despite being less promoted—can lead to significantly lower tax bills, especially for those with investments, insurance, or housing expenses.
Here’s how it breaks down: If your gross income is ₹15 lakh, you need around ₹4 lakh in total deductions for the old regime to beat the new one. At ₹20 lakh or more, deductions above ₹4.5 lakh tip the scales. Even at incomes between ₹7–10 lakh, deductions of just ₹3 lakh can make the old regime more beneficial.
And most salaried taxpayers reach those levels without even trying. Between Section 80C (₹1.5 lakh), health insurance under 80D, home loan interest under 24(b), HRA exemptions, and the ₹50,000 standard deduction (available under both regimes), deductions often stack up fast.
The problem? Too many filers opt into the new regime without doing the math—because it’s now the default option.
It’s critical to remember: the new regime offers lower tax rates but removes nearly all deductions (except the standard ₹50,000). That works if you haven’t claimed much—but if you’ve invested or pay rent, the old regime still wins hands down.
The government’s tax reforms were designed to simplify the process, not to force taxpayers into higher bills. Yet unless you actively choose the old regime, you could end up doing exactly that.
Before you click submit, total your deductions. Use a tax calculator. If the old regime saves you more, opt in explicitly. Because in FY 2024–25, letting the system choose for you could cost you.