Tax Saving Options in Old vs New Regime
- Rashmita Choudhary
- Oct 15
- 8 min read
Tax saving options under the old and new income tax regimes in India differ sharply, especially for FY 2025–26. The old regime continues to allow a wide range of deductions and exemptions such as Section 80C, 80D, home loan benefits, and HRA, which significantly reduce taxable income. The new regime, on the other hand, offers lower tax rates and a higher exemption threshold but with minimal deductions beyond the standard deduction. Understanding these differences is crucial for making an informed decision. Tax planning tools and platforms like TaxBuddy make this comparison easier and ensure the best choice is made.
Table of Contents
Tax Saving Options in Old vs New Regime
Tax saving opportunities under India’s income tax system differ significantly between the old and new regimes, especially in FY 2025–26. The old regime allows more than 70 exemptions and deductions covering investments, allowances, and interest payments. The new regime, in contrast, has simplified slab rates and a higher exemption threshold but permits very limited deductions. Understanding these contrasts helps taxpayers decide which option better suits their income level, spending habits, and long-term savings goals.
How do tax saving options differ in the old vs new regime?
The old regime continues to reward taxpayers who invest in tax-saving instruments such as PPF, ELSS, life insurance, or health insurance. It also covers lifestyle-related deductions like HRA, LTA, education loan interest, and housing loan interest. On the other hand, the new regime focuses on lower slab rates and broader exemption limits, cutting down on most deductions. The advantage of the old regime is flexibility in reducing taxable income, whereas the new regime offers simplicity and clarity.
Which exemptions and deductions are lost in the new regime?
Under the new regime, taxpayers cannot claim popular deductions such as Section 80C investments, Section 80D health premiums, HRA, LTA, and education loan interest. Even housing loan interest for self-occupied property is unavailable. The only major benefit retained is the standard deduction, which was enhanced to ₹75,000 in Budget 2025. This makes the new regime more beneficial to those without significant deductions.
Section 80C Tax Saving Investments
How 80C works in the old tax regime Section 80C is one of the most widely used provisions in the old regime. It allows deductions up to ₹1.5 lakh per year for investments in instruments such as PPF, EPF, ELSS, NSC, life insurance premiums, and tuition fees. By maximizing this section, individuals significantly reduce taxable income.
Is Section 80C allowed in the new tax regime? No, the new regime does not permit 80C deductions. This means taxpayers who rely heavily on such savings instruments lose this avenue for reducing taxable income under the new system.
Section 80D and Health Insurance Premiums
How 80D works in the old tax regime Section 80D offers deductions for health insurance premiums, preventive health check-ups, and coverage for dependent parents. Deductions range from ₹25,000 for individuals and families to ₹50,000 for senior citizens, making it an essential tax-saving tool in the old regime.
Is 80D allowed in the new tax regime? No, health insurance deductions are not available in the new regime. Taxpayers relying on medical cover for savings benefit only under the old system.
Home Loan Interest under Section 24(b)
How Section 24(b) works in the old tax regime Homeowners can claim up to ₹2 lakh annually as deductions for interest paid on housing loans for self-occupied property. For let-out property, the entire interest can be claimed. This is one of the biggest tax-saving options for salaried and self-employed taxpayers in the old regime.
Is home loan interest deduction allowed in the new tax regime? No, interest deduction on self-occupied property loans is not available in the new regime. Only let-out properties continue to qualify for interest deductions.
House Rent Allowance (HRA) and Leave Travel Allowance (LTA)
How HRA and LTA work in the old tax regime HRA exemptions reduce taxable income for salaried individuals paying rent, while LTA helps employees save tax on travel expenses within India. These allowances are commonly claimed under the old system.
Is HRA or LTA allowed in the new tax regime? No, HRA and LTA are not permitted in the new regime, which eliminates these popular employee benefits from tax planning.
Education Loan Interest under Section 80E How 80E works in the old tax regime Section 80E allows deductions for interest paid on education loans for higher studies in India or abroad. There is no maximum limit, and deductions are available for up to eight years.
Is 80E allowed in the new tax regime? No, the new tax regime does not allow education loan interest deductions.
Savings Interest under Sections 80TTA/80TTB How 80TTA/80TTB work in the old tax regime Section 80TTA provides deductions up to ₹10,000 on interest from savings accounts, while 80TTB extends benefits up to ₹50,000 for senior citizens.
Are 80TTA/80TTB deductions allowed in the new tax regime? No, these deductions are not permitted under the new system, reducing benefits for senior citizens and regular savers.
Donations under Section 80G
How 80G works in the old tax regime Donations to specified charitable institutions qualify for deductions ranging from 50% to 100% of the donation amount, subject to limits. This encourages philanthropy while reducing tax liability.
Is 80G allowed in the new tax regime? No, deductions for donations under 80G are not available in the new regime.
Standard Deduction and Recent Budget Updates Standard deduction in the old tax regime Salaried individuals and pensioners under the old system enjoy a standard deduction of ₹50,000.
Standard deduction in the new tax regime In Budget 2025, the standard deduction was increased to ₹75,000 under the new system, giving taxpayers some relief despite fewer available deductions.
When should taxpayers choose the old vs new regime?
The choice depends on income level and deductions. Taxpayers with deductions exceeding ₹4.5 lakh generally save more in the old regime. Those with fewer claims, or those seeking a simplified structure with reduced rates, often benefit from the new regime.
How to switch between regimes and filing requirements
The new regime is now the default option. To stay in the old regime, individuals must file Form 10-IEA along with their income tax return. Salaried employees can switch regimes annually, while taxpayers with business income can change only once.
Recent Budget 2025 changes and their impact
The Budget raised the basic exemption in the new regime to ₹4 lakh and expanded slab benefits for middle-class taxpayers. Income up to ₹7 lakh is tax-free in both systems due to the Section 87A rebate. The government’s intent is to gradually make the new regime more attractive by reducing rates while limiting exemptions.
Conclusion
Both regimes have merits: the old regime suits taxpayers with multiple deductions, while the new regime favors those who prefer simplicity. Tools and advisory platforms make this choice easier. For anyone looking for assistance in tax filing, it is recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy provides flexibility by offering both self-filing and expert-assisted plans. Taxpayers comfortable with preparing their returns can use the AI-driven self-filing option, which guides them step-by-step and minimizes errors. Those with complex returns, such as capital gains, F&O trades, or multiple income sources, can choose the expert-assisted plan where a tax professional reviews and files the return. This ensures accuracy, compliance, and peace of mind.
Q2. Which is the best site to file ITR? The official Income Tax e-filing portal remains the government’s platform for filing returns. However, private platforms like TaxBuddy are considered among the best because they simplify the process, reduce filing errors, and provide additional features like regime comparison, tax-saving insights, and post-filing support for notices. This makes them more user-friendly, especially for salaried individuals and small businesses.
Q3. Where to file an income tax return? An income tax return can be filed either through the government’s official portal (incometax.gov.in) or via trusted e-filing platforms such as TaxBuddy. The choice depends on the taxpayer’s preference. The government portal is suitable for direct filing, while TaxBuddy offers added convenience with guided filing, AI checks, and professional assistance.
Q4. Can HRA and home loan deductions be claimed under the new regime? No, the new tax regime does not allow deductions for HRA or for home loan interest on self-occupied property. These benefits remain only in the old regime. For let-out properties, home loan interest can still be claimed. Taxpayers must weigh these options before deciding on a regime, as such deductions can make a substantial difference in taxable income.
Q5. Is Section 80C still valid under the old regime? Yes, Section 80C remains fully valid under the old regime. Taxpayers can claim up to ₹1.5 lakh on eligible investments and expenses like PPF, EPF, ELSS, NSC, life insurance premiums, and tuition fees. It is one of the most widely used deductions in India and continues to make the old regime attractive for individuals who actively invest.
Q6. What is the standard deduction available in the new regime for FY 2025–26? As per Budget 2025, the standard deduction under the new tax regime has been raised to ₹75,000 for salaried individuals and pensioners. This deduction is available regardless of whether other exemptions are claimed. It provides relief even though most other deductions are unavailable in the new system.
Q7. Can taxpayers switch between regimes every year? Salaried taxpayers can switch between the old and new regimes every year while filing their returns. This gives them flexibility to choose based on the deductions and exemptions they are eligible for in a particular year. However, taxpayers with business or professional income have stricter rules—they can opt out of the old regime only once, and once they switch to the new regime, they cannot switch back.
Q8. Is Section 87A rebate available in both regimes? Yes, the rebate under Section 87A is available in both regimes. For FY 2025–26, individuals with taxable income up to ₹7 lakh are eligible for the rebate. This ensures no tax liability up to that income level, irrespective of the chosen regime, although the overall calculation of taxable income may differ between the two.
Q9. How does Section 80D work for health insurance premiums under the old regime? Section 80D allows deductions for health insurance premiums and preventive health check-ups. Under the old regime, taxpayers can claim up to ₹25,000 for themselves and their family, and an additional ₹25,000 for dependent parents. If parents are senior citizens, the deduction increases to ₹50,000. This makes health insurance a powerful tax-saving tool alongside its primary benefit of medical coverage.
Q10. Are deductions under 80TTA/80TTB allowed in the new regime? No, the new tax regime does not allow deductions under Sections 80TTA and 80TTB. These sections provide relief for savings account interest (up to ₹10,000 for individuals under 80TTA, and up to ₹50,000 for senior citizens under 80TTB) in the old regime. Their removal is one reason why senior citizens often benefit more from sticking with the old system.
Q11. Do senior citizens benefit more under the old regime or the new one? For senior citizens, the old regime is often more beneficial if they have significant deductions such as health insurance under Section 80D, savings interest under Section 80TTB, or housing loan interest. These reduce taxable income substantially. However, if deductions are minimal and income is moderate, the new regime may still provide savings due to higher exemption limits and lower rates. The choice should be based on individual circumstances.
Q12. Can TaxBuddy help in comparing tax liability between old and new regimes before filing? Yes, TaxBuddy offers built-in comparison tools to help taxpayers calculate liability under both regimes before choosing. This feature allows individuals to input income, investments, and expenses to see which system offers the lowest tax outgo. Combined with self-filing or expert-assisted support, TaxBuddy ensures taxpayers make the most tax-efficient choice each year.
