What is the Old Tax Regime?

Last Updated On -01 Sep 2025

In regards to income tax in India, people have two options: the Old Tax Regime and the New Tax Regime. Although the new system will provide concessional taxation rates with limited deductions, the old taxation system remains popular among taxpayers who would want to take advantage of numerous exemptions and deductions to reduce their taxable income. Anyone who intends to make informed financial decisions at the time of tax filing should have an understanding of the history of the old tax regime.

What is the Meaning of the Old Tax Regime?

The Old Tax Regime is the old regime of income taxation in India, which enables the taxpayers to take advantage of several exemptions, rebates, and deductions in accordance with the Income Tax Act, 1961. These deductions will decrease the total taxable income, which usually leads to a reduction in tax liability. The old regime tax rates are, however, relatively high when compared to the concessional rates offered in the new regime.

This was the sole method of computing the taxes until the New Tax Regime was implemented in the Union Budget 2020. In spite of the new, most people still want the old regime due to the huge tax reductions that can be earned through investment-related breaks.

Tax Slabs under the Old Tax Regime (Assessment Year 2024-25)

Income tax slabs of the old regime are as follows:

To the extent of ₹2,50,000, no tax (basic exemption limit)
₹2,50,001 to ₹5,00,000 - 5%
₹5,00,001 to ₹10,00,000 - 20%
Above ₹10,00,000 - 30%

Note: The exemption limit of senior citizens (60-80 years) is ₹3,00,000, and the exemption limit of very senior citizens (above 80 years) is ₹5,00,000.

Moreover, cess (4%) and relevant surcharge are charged on the amount of tax to be paid.

Here’s the information regarding the common deductions in the old tax regime:

Section	Type of Deduction	Limit/ Details
80C	Investments like PPF, ELSS, Life insurance, home loan principal, NSC, Tax saving FD, etc.	Up to ₹1,50,000
80CCD (1B)	Contribution to the national pension scheme (NPS	Additional ₹50,000 (over and above 80C)
80D	Health Insurance Premium (Self, family, parents)	₹25,000 (self & family) + ₹25,000 (parents under 60) OR ₹50,000 (parents above 60)
24(b)	Home loan interest (for self-occupied property)	Up to ₹2,00,000
80E	Interest on the education loan	No upper limit (allowed for 8 years)
10(13A)	House rent allowance (HRA)	Exempt subject to conditions (rent paid, salary, city of residence)
10(5)	Donations to the specified funds/ charitable institutions	Exemption for travel costs
80G	Savings account interest (80TTA for general taxpayers, 80TTB for senior citizens)	50% or 100% deductions, depending on fund type

Key Features of the Old Tax Regime

Multiple Deductions and Exemptions Available:

Section 80C: Investments in PPF, ELSS, and life insurance, repayment of the principal of a home loan, etc. (up to ₹1.5 lakh).
Section 80D: Health insurance premium.
Section 24(b): Interest on home loan.
HRA (House Rent Allowance) exemption.
LTA (Leave Travel Allowance).

Flexibility in Tax Planning:

Taxpayers will be in a position to know how to save and invest their money to minimize the income that should be taxed.

Suitable for High-Investment Taxpayers:

Positive to those who are already investing in insurance, mutual funds, and retirement plans.

Key Advantages & Disadvantages of the Old Tax Regime

If you decide to use the old system of taxation, make sure that you have substantial total deductions and exemptions that will help to lower your taxable income. Otherwise, you won't spend a lot of money on investments and might pay even higher tax than you would in the new regime.

Advantages of the old tax regime:

Gives taxpayers the option of saving money through deductions.
Promotes discipline in investment.
Provides relief to salaried individuals through allowances like HRA and LTA.
Ideal for those with home loans, medical insurance, and long-term investments.

Disadvantages of the Old Tax Regime:

Increased taxation rates than the new regime.
More forms have to be filled in order to test exemptions.
Complex tax filing process due to multiple deductions.

For example,

Suppose someone is making ₹12,00,000 a year. Assuming that under the Old Tax Regime, they provide such deductions as:

₹1,50,000 under Section 80C
₹50,000 under Section 80D
₹2,00,000 under home loan interest (Section 24)

They get their taxable income down to ₹8,00,000, and they pay tax. This illustrates the way the old regime rewards taxpayers who invest intelligently.

Did you know₹

Previously, the only kind of tax regime in India was the old tax regime, and people worked hard to invest in new kinds of taxes, such as Public Provident Fund (PPF) and National Savings Certificate (NSC), not only to make money but also to save tax. PFP is, even today, one of the most popular (long-term) tax-saving instruments in the old regime.

Frequently Asked Questions (FAQs)

Who is supposed to prefer the old tax regime?

Those having substantial investments, housing loans, and expenses that can be deducted should opt to use the old tax regime.

Am I to change between old and new regimes year by year?

Yes, people on salaries have the option of changing yearly, but business individuals have no choice but to remain with one regime, other than permanently leaving the new regime.

And is the new regime superior to the old on taxation?

It is based on your budgetary practices. The old regime will pay less tax in case you claim various deductions. Unless you make a huge investment, the new regime may be less complicated and less expensive.