ITR 2025: Why is the old tax regime better for those with 12 lakh income? What is the problem with the new regime?

Every year, when the time comes to file Income Tax Return (ITR), most people consider it a formality and settle it in a hurry. Some people choose the old tax regime, and some people choose the new tax regime. Last year, the government announced that income up to Rs 12 lakh is free. But if you are choosing the new tax regime based only on the government announcement, then wait a bit. A small mistake can cause you to lose thousands. Even if your income is less than Rs 12 lakh, the new tax system may not be the best option. Why is this so? Let us give complete information.

If you are preparing to file ITR between July and September 2025, then it is important to keep in mind that you are filing the return for the financial year 2024-25 (income from 1 April 2024 to 31 March 2025). Some people are choosing the new tax system, thinking that tax on income up to Rs 12 lakh has been waived in the Budget 2025. But this relief has not been implemented yet. This change will come into effect from next year, i.e., financial year 2025-26. You will file your ITR in 2026.

So if you have assumed that the new tax system will benefit you, then you may be mistaken. The new system is the 'default' right now, but this does not mean that this time you will not have to pay any tax on an amount up to Rs 12 lakh. If you have invested money in house rent (HRA), home loan, children's fees, medical insurance, and investments (like PPF, LIC, ELSS, etc.), then you can get more benefits from the old tax system.

What are the exemptions in the old tax regime?

In the old tax regime, you can get an exemption of up to Rs 1.5 lakh under section 80C, an exemption for medical expenses under section 80D, and an exemption for home loan interest under section 24(b). Apart from this, standard deduction of Rs 50,000 and HRA exemption are also available. By combining all these exemptions, your taxable income can be reduced significantly, and tax can also be reduced.

Understand this with an example. Suppose your income is Rs 15 lakh. If you have taken deductions up to Rs 4 lakh, then the old tax system will be more beneficial for you. Similarly, if your income is more than Rs 20 lakh and your deductions are more than Rs 4.5 lakh, then the old system will be better.

Compare the new and old tax systems.

Often, people choose the new tax system without comparing it, because it is visible automatically. But this can be harmful to you, especially if you have already invested or taken a loan. The new tax system does not give any exemptions.

So do not take any hasty decision while filing ITR this time. First of all, study all your investments and expenses in depth. Compare both the tax systems with the help of a tax calculator or consult a tax expert. If the old system is proving to be cheaper, then choose it.

Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.