Indian Government vs. Big Corporations: The Battle for Fair Markets

Comparative Analysis: Old Tax Regime vs. New Tax Regime (FY 2025-26) – India

1. Introduction

The Indian tax system allows taxpayers to choose between two tax regimes – the Old Tax Regime (which provides tax deductions and exemptions) and the New Tax Regime (which offers lower tax rates but removes most deductions).

For FY 2025-26, the government has made major revisions to the New Tax Regime, making it more attractive for certain income groups. However, the Old Tax Regime continues to benefit individuals who claim high deductions.

This analysis will compare both tax regimes in-depth to help individuals and businesses make an informed decision.

2. Key Differences Between Old and New Tax Regimes

Category	Old Tax Regime	New Tax Regime (2025-26)
Tax Rates	Higher tax rates	Lower tax rates
Deductions & Exemptions	Allows deductions like 80C, 80D, HRA, home loan interest, LTA, standard deduction, NPS, etc.	No deductions allowed (except standard deduction of ₹75,000)
Standard Deduction	₹50,000 for salaried individuals	₹75,000 for salaried individuals
Rebate (Under Section 87A)	No tax on income up to ₹5 lakh	No tax on income up to ₹12 lakh
Who Benefits More?	Beneficial for those with high tax-saving investments	Beneficial for those with minimal deductions
Simplicity	Complex (requires investment planning)	Simpler (fixed slabs, fewer calculations)

3. Income Tax Slabs Under Both Regimes (FY 2025-26)

🔹 Old Tax Regime (With Deductions)

Income Slab (₹)	Tax Rate (%)
0 - 2,50,000	0% (No Tax)
2,50,001 - 5,00,000	5%
5,00,001 - 10,00,000	20%
Above 10,00,000	30%

  Allows deductions like 80C (PPF, LIC), 80D (health insurance), home loan interest, HRA, LTA, etc.

🔹 New Tax Regime (FY 2025-26 – Revised)

Income Slab (₹)	Tax Rate (%)
0 - 4,00,000	0% (No Tax)
4,00,001 - 8,00,000	5%
8,00,001 - 12,00,000	10%
12,00,001 - 16,00,000	15%
16,00,001 - 20,00,000	20%
20,00,001 - 24,00,000	25%
Above 24,00,000	30%

No deductions allowed, except the increased standard deduction (₹75,000).

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4. Advantages and Disadvantages of Both Regimes

✅ Advantages of the Old Tax Regime

✔ Higher tax savings for those claiming multiple deductions.
✔ Allows exemptions like HRA, LTA, home loan interest, 80C (PPF, LIC), 80D (health insurance), etc.
✔ Suitable for individuals who make long-term financial investments.

❌ Disadvantages of the Old Tax Regime

❌ Complex tax calculations due to multiple deductions.
❌ Requires investment planning to maximize tax benefits.
❌ Higher tax rates compared to the new regime.

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✅ Advantages of the New Tax Regime

✔ Lower tax rates across all income slabs.
✔ Simpler tax calculations (no need to track deductions).
✔ Higher tax-free limit (₹12 lakh tax-free with rebate).

❌ Disadvantages of the New Tax Regime

❌ No deductions allowed, except the standard deduction of ₹75,000.
❌ Less beneficial for individuals who invest in tax-saving schemes.

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5. Who Should Choose Which Regime?

✅ Best for Salaried Employees (Middle-Class Individuals)

• If you invest in PPF, EPF, home loans, LIC, etc. → Old Regime is better.
• If you don’t claim many deductions and want simplicity → New Regime is better.

✅ Best for Self-Employed & Freelancers

• If you don’t have tax-saving investments → New Regime is simpler and better.
• If you claim business expenses & deductions, the Old Regime may be better.

✅ Best for Senior Citizens

• The New Regime benefits pensioners, as income up to ₹12 lakh is tax-free.
• If a senior citizen has medical insurance (80D), the Old Regime is better.

✅ Best for Business Owners & MSMEs

• Corporate tax remains the same in both regimes.
• The New Regime encourages consumption, benefiting businesses indirectly.

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6. Tax Savings Example – Old vs. New Regime

Let's assume an individual earns ₹15 lakh per year and check tax savings under both regimes:

Old Tax Regime Calculation

• Gross Income: ₹15,00,000
• Deductions: ₹1,50,000 (80C - PPF, LIC)
• Health Insurance (80D): ₹25,000
• Home Loan Interest: ₹1,00,000
• Taxable Income: ₹12,25,000
• Tax Payable: ₹1,76,500

New Tax Regime Calculation

• Gross Income: ₹15,00,000
• Standard Deduction: ₹75,000
• Taxable Income: ₹14,25,000
• Tax Payable: ₹1,53,750

 Conclusion: The Old Regime is better for taxpayers who claim deductions. The New Regime is better for those who don’t invest in tax-saving schemes.

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7. Final Verdict – Which One is Better?

Taxpayer Type	Recommended Tax Regime
Salaried Person (Low Investments)	✅ New Regime
Salaried Person (High Investments)	✅ Old Regime
Self-Employed / Freelancer	✅ Depends on deductions claimed
Senior Citizen (Pension Income Only)	✅ New Regime
Business Owner / MSME	✅ Old Regime for deductions

8. Conclusion

• The Old Tax Regime is better for those who claim deductions & exemptions.
• The New Tax Regime is simpler and has lower rates, but does not allow deductions.
• Choosing the best regime depends on your income, deductions, and financial goals.

🔹 If you invest in tax-saving schemes → Choose the Old Regime.
🔹 If you want lower taxes without deductions → Choose the New Regime.

Final Tip: Use an income tax calculator or consult a tax expert before making your decision.