Old vs New Tax Regime: Key ITR deductions may end for Rs 12 lakh earners from next year

Salaried taxpayers earning up to Rs 12 lakh may no longer need to claim traditional deductions and exemptions under the old tax regime starting next year. Thanks to recent changes in the new tax regime, normal income up to Rs 12 lakh will effectively become tax-free from FY 2025–26 (AY 2026–27). That means the ongoing ITR filing season for FY 2024–25 could be the last time many such taxpayers claim old-regime tax benefits.

With the tax-filing deadline for AY 2025–26 set for September 15, 2025, this year presents a transition point for many salaried individuals weighing both regimes.

Currently, taxpayers can still access various exemptions under the old regime, such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), deductions under Sections 80C to 80U, and interest on home loans under Section 24(b). However, these are not applicable under the new regime, which offers a flatter structure with limited deductions but higher income thresholds for rebates.

Here’s how the two regimes stack up for FY 2024–25 (AY 2025–26):

Rebate eligibility under Section 87A: Up to Rs 5 lakh in the old regime vs Rs 7 lakh in the new regime.

Standard deduction: Rs 50,000 in the old regime, increased to Rs 75,000 in the new regime.

Rebate cap: Rs 12,500 (old regime) vs Rs 25,000 (new regime).

Deductions and exemptions

Some deductions, such as the standard deduction under Section 16(ia), are available under both regimes. But others—like HRA (Section 10(13A)), LTA (Section 10(5)), entertainment allowance, professional tax, and set-off of housing loan interest—remain exclusive to the old tax regime.

Importantly, the new regime allows only limited benefits under Sections 80CCD(2) and 80CCH(2), excluding the broader 80C basket popular among salaried taxpayers.

With the government clearly nudging taxpayers toward the simplified new regime, those with annual incomes below Rs 12 lakh may soon find the old regime's elaborate tax planning redundant.

As tax experts point out, the shift will simplify filing but reduce the incentive to invest purely for tax-saving purposes. For FY 2024–25, however, those choosing the old regime should fully leverage available deductions—potentially for the last time.

Bottom line: If your income is under ₹12 lakh, 2025 could be your final year claiming old-regime tax breaks. Choose your tax regime wisely before filing this year’s ITR