Old vs new tax regime after Budget 2025 — which one actually saves more?

Question

Hi everyone, I'm Ananya, working as a content manager in Bangalore, taking home around ₹72k per month (CTC roughly ₹11.5L). My company's payroll team is asking me to declare my tax regime choice for this FY and honestly I'm so confused after all the Budget 2025 changes. I've been in old regime for 3 years, claiming HRA (paying ₹18k rent), 80C (PPF + ELSS), and my parents' health insurance under 80D. But everyone around me is saying new regime is better now with the ₹12L exemption limit and revised slabs. My CA is on leave and I can't get a clear answer anywhere. Is it actually worth switching? I don't want to regret it mid-year when I can't switch back. Has anyone done the actual math on a salary like mine?

Answer 1

Honestly, for your salary range this is actually not as clear-cut as people are making it sound on Twitter and YouTube.

Let me break it down simply. Under the new regime, with ₹12L basic exemption and the standard deduction of ₹75,000, your effective tax on ₹11.5L CTC comes out quite low — possibly zero or near-zero depending on your exact structure. That part is real, not hype.

But here's what most people are getting wrong right now — they're forgetting that the ₹12L exemption only applies if your total income is at or below ₹12L. If your CTC is ₹11.5L but you have any other income — interest, freelance, anything — you could cross that threshold and the math changes completely.

Now for your specific situation. You're claiming HRA on ₹18k rent, that's roughly ₹1.5L per year in exemption if you're in a metro. Add ₹1.5L from 80C (PPF + ELSS). Add maybe ₹25k from 80D for parents' insurance. Plus standard deduction of ₹50k in old regime. That's easily ₹3.75L in deductions bringing your taxable income down to around ₹7.75L in old regime — and you'd pay roughly ₹75,000-80,000 in tax there.

In new regime, with ₹75k standard deduction, taxable income is ₹10.75L. Tax comes to around ₹61,000-65,000 at new slab rates.

So new regime likely wins for you by about ₹10,000-15,000 annually. Not a massive difference but real money.

However — and this is important — if you're genuinely investing in ELSS through SIPs and PPF regularly, those habits matter beyond just tax saving. Don't stop them just because you switched regimes. Keep the investments, just stop treating them as tax tools.

One more thing: once you submit Form 10-IEA to opt out of the new regime back to old, you can switch every year if you're salaried. Your payroll team may not tell you this clearly. You're not locked in forever.

My recommendation: go with new regime this year given your numbers, but run the exact calculation on the income tax department's own calculator at incometax.gov.in before finalising. Takes 10 minutes and removes all guesswork.

Answer 2

I'll slightly push back on the advice to just go with new regime here.

Rajan's math is right but I think the conclusion undersells the old regime for someone in Ananya's situation. ₹10,000-15,000 difference per year is what, ₹1,200 a month? That's not nothing but it's also not life-changing.

What I'd think about instead: Ananya mentioned she has parents on a health insurance policy under 80D. Are these senior citizen parents? Because if yes, that deduction goes up to ₹50,000 just for them under old regime — not the standard ₹25k. That alone could flip the calculation.

Also, HRA at ₹18k rent in Bangalore feels low to me. If she's actually paying more and just mentioned ₹18k as an example, the actual HRA exemption could be higher and old regime could win comfortably.

The bigger point is this — new regime forces you to actually invest without the tax carrot. Some people need that carrot. If Ananya stops her ELSS SIPs after switching because the psychological incentive is gone, she's lost way more than ₹15k in long-term wealth creation.

I've seen this happen with colleagues in my office. Switched to new regime, stopped the SIPs within 6 months because 'no point now', and now they're sitting on zero equity exposure at 32.

My take: if you are a disciplined investor who will continue PPF and ELSS regardless, new regime makes sense. If the 80C deduction is what's keeping you invested — stay in old regime, keep the habit, and revisit next year.