2 min
20 January 2025
When tax season rolls around, one question troubles many salaried and self-employed individuals: Which income tax regime is better for me? Should you go for the old regime, with its multiple deductions and exemptions? Or should you choose the new regime, which offers lower tax rates but fewer deductions?
Let us break it down in simple terms so you can decide what is best for you while exploring how a home loan can be a game-changer in your tax planning.
1. Your income level
If your taxable income is high, the old regime might be more beneficial due to its numerous deductions and exemptions. For example, if you are repaying a home loan, the deductions for interest and principal repayment alone can reduce your taxable income by up to Rs. 3.5 lakh (Rs. 2 lakh under Section 24(b) and Rs. 1.5 lakh under Section 80C).
For lower-income levels, the new regime’s lower tax rates may work better.
2. Deductions and exemptions
The old regime allows deductions for expenses like:
3. Your investment habits
Do you regularly invest in tax-saving instruments like PPF, ELSS, or NPS? If yes, the old regime rewards you with significant tax savings.
On the other hand, if you are not keen on making specific investments to save tax and prefer simplicity, the new regime might be the way to go.
4. Expenses like home loan EMIs
A home loan can be a game-changer in the old regime. The deductions available for both principal repayment (under Section 80C) and interest payment (under Section 24(b)) can lead to substantial tax savings.
For example, let us say you are repaying a home loan with an annual interest of Rs. 1.8 lakh and a principal repayment of Rs. 1.4 lakh. In the old regime, you could claim these amounts as deductions and reduce your taxable income by Rs. 3.2 lakh.
The new regime does not offer these benefits. So, if you are a homebuyer, the old regime often makes more financial sense.
5. Your financial goals
If you are working toward financial goals like owning a home or saving for retirement, the old tax regime aligns better. Its deductions encourage long-term investments and savings.
The new regime is more suitable for those who prioritise simplicity and do not want to lock their funds into specific investments.
Choose the old regime if:
Here are a few benefits of opting for a home loan from Bajaj Housing Finance:
1. High loan amount: Secure funding up to Rs. 15 crore* to turn your dream home into reality.
2. Low interest rates: Enjoy interest rates starting 7.99%* p.a., and EMIs as low as Rs. 722/lakh*.
3. Quick approval: Get approved within 48 Hours* of applying – sometimes even sooner.
4. Flexible repayment tenure: Choose a repayment term of up to 32 years for comfortable EMIs.
5. Simple application: Take advantage of doorstep document collection for a smooth process.
6. Balance transfer facility: Move your existing home loan and get a top-up loan with better terms.
Start planning today! Apply for a Bajaj Housing Finance Home Loan.
Let us break it down in simple terms so you can decide what is best for you while exploring how a home loan can be a game-changer in your tax planning.
Understanding the two tax regimes
Before diving into the comparison, let us quickly understand what these two regimes are:Old income tax regime
- Offers multiple deductions and exemptions (like HRA, 80C, 80D).
- Encourages saving and investing by allowing tax breaks.
- Comes with a more complex structure due to numerous rules.
New income tax regime
- Simplified tax structure with lower tax rates.
- Removes most deductions and exemptions.
- Designed to give taxpayers the freedom to use their money without tying it up in specific investments.
Tax rates under both regimes
Here is a quick comparison of the tax rates:Old regime tax slabs
| Total income | Individuals below 60 years | Individuals aged below 60 years to 80 years | Individuals above 80 years |
| Up to Rs. 2,50,000 | Nil | Nil | Nil |
| Rs. 2,50,001 to Rs. 3,00,000 | 5% | Nil | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% | 5% | Nil |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% | 20% | 20% |
| Above Rs. 10,00,000 | 30% | 30% | 30% |
New regime tax slabs
| Income slabs | Tax rate |
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 7,00,000 | 5% |
| Rs. 7,00,001 to Rs. 10,00,000 | 10% |
| Rs. 10,00,001 to Rs. 12,00,000 | 15% |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
How to choose the right regime?
When deciding which income tax regime is better, consider these key factors:1. Your income level
If your taxable income is high, the old regime might be more beneficial due to its numerous deductions and exemptions. For example, if you are repaying a home loan, the deductions for interest and principal repayment alone can reduce your taxable income by up to Rs. 3.5 lakh (Rs. 2 lakh under Section 24(b) and Rs. 1.5 lakh under Section 80C).
For lower-income levels, the new regime’s lower tax rates may work better.
2. Deductions and exemptions
The old regime allows deductions for expenses like:
- HRA (House Rent Allowance): Save tax on your rent.
- Section 80C investments: Tax-saving options like PPF, ELSS, and LIC policies.
- Section 24(b): You can claim up to Rs. 2 lakh on interest paid on a home loan for a self-occupied property.
- Health insurance (Section 80D): Save up to Rs. 75,000 on premiums.
3. Your investment habits
Do you regularly invest in tax-saving instruments like PPF, ELSS, or NPS? If yes, the old regime rewards you with significant tax savings.
On the other hand, if you are not keen on making specific investments to save tax and prefer simplicity, the new regime might be the way to go.
4. Expenses like home loan EMIs
A home loan can be a game-changer in the old regime. The deductions available for both principal repayment (under Section 80C) and interest payment (under Section 24(b)) can lead to substantial tax savings.
For example, let us say you are repaying a home loan with an annual interest of Rs. 1.8 lakh and a principal repayment of Rs. 1.4 lakh. In the old regime, you could claim these amounts as deductions and reduce your taxable income by Rs. 3.2 lakh.
The new regime does not offer these benefits. So, if you are a homebuyer, the old regime often makes more financial sense.
5. Your financial goals
If you are working toward financial goals like owning a home or saving for retirement, the old tax regime aligns better. Its deductions encourage long-term investments and savings.
The new regime is more suitable for those who prioritise simplicity and do not want to lock their funds into specific investments.
Who benefits more from each regime?
In the case of the old regime:- People with high deductions (for example, home loan EMIs, insurance, education expenses).
- Those with fixed investments like PF, PPF, or NSC.
- Salaried individuals who receive allowances like HRA and LTA.
- People with fewer investments or deductions.
- Individuals who want a straightforward tax structure.
- Salaried professionals who do not utilise tax exemptions.
How does a home loan impact your choice?
A home loan can be a game-changer under the old tax regime. You can:- Claim up to Rs. 1.5 lakh under Section 80C for principal repayment.
- Deduct up to Rs. 2 lakh under Section 24(b) for interest payments.
The verdict
So, which income tax regime is better for you? It depends entirely on your financial habits and priorities.Choose the old regime if:
- You have significant deductions and exemptions.
- You are focused on disciplined savings and investments.
- You prefer a simpler tax system.
- You do not have major tax-saving investments.
Save Smart with Bajaj Housing Finance Home Loan
Are you planning to save big on taxes while achieving your dream of owning a home? A home loan can unlock significant tax benefits under the old regime. Bajaj Housing Finance offers competitive home loans to help you invest in your future.Here are a few benefits of opting for a home loan from Bajaj Housing Finance:
1. High loan amount: Secure funding up to Rs. 15 crore* to turn your dream home into reality.
2. Low interest rates: Enjoy interest rates starting 7.99%* p.a., and EMIs as low as Rs. 722/lakh*.
3. Quick approval: Get approved within 48 Hours* of applying – sometimes even sooner.
4. Flexible repayment tenure: Choose a repayment term of up to 32 years for comfortable EMIs.
5. Simple application: Take advantage of doorstep document collection for a smooth process.
6. Balance transfer facility: Move your existing home loan and get a top-up loan with better terms.
Start planning today! Apply for a Bajaj Housing Finance Home Loan.
