ITR Filing 2025: Key Deductions Compared Between Old & New Tax Structures

The deadline for filing income tax returns (ITR) for the financial year 2024–25, corresponding to assessment year 2025–26, has now been extended to 15 September. This extension offers taxpayers additional time to carefully evaluate whether to proceed with the old tax regime or the new one, depending on which proves more beneficial for their financial situation. According to experts, selecting the right option is essential to maximise tax savings and ensure compliance while avoiding penalties.

Old Tax Regime And Its Benefits

The old tax system continues to remain popular among individuals who benefit significantly from deductions and exemptions. Taxpayers can claim reductions on investments, insurance premiums and housing-related expenses, which often bring down overall liability. For instance, deductions up to ₹1.5 lakh are available under Sections 80C, 80CCC and 80CCD(1) for expenses such as life insurance, children’s tuition fees and pension contributions.

Experts also highlight that home loan borrowers can take advantage of Section 24(b), which provides up to ₹2 lakh deduction on home loan interest for self-occupied property. Additional relief of ₹50,000 can be availed under Section 80EE for first-time home buyers. Beyond this, those who have invested in electric vehicles may claim a deduction of up to ₹1.5 lakh on loan interest under Section 80EEB, an incentive that aligns with the government’s green mobility push.

Medical And Health-Related Exemptions

Health and medical expenditure play a significant role in the old tax structure. Section 80D permits deductions on health insurance premiums and preventive check-ups. The maximum limit is ₹25,000 for self, spouse and dependent children, with an additional ₹25,000 allowed for parents. Within this, up to ₹5,000 can be claimed for preventive check-ups.

In cases where a taxpayer or dependents require treatment for specified diseases, Section 80DDB allows deductions of up to ₹40,000 for general patients and up to ₹1 lakh for senior citizens. According to financial planners, such exemptions remain one of the primary reasons many households prefer sticking to the old regime.

Additional Deductions Under The Old Regime

The old system offers further flexibility through deductions on savings interest up to ₹10,000, and specific rebates such as Section 87A, which provides relief up to ₹12,500 for incomes up to ₹5 lakh. Rent paid without receiving HRA can be deducted under Section 80GG, a feature useful for self-employed individuals. Donations to charitable organisations, scientific institutions and political parties are also eligible for deductions, though subject to defined limits.

Specially-abled individuals are entitled to additional exemptions, providing them with greater financial relief. Experts note that these wider options make the old regime highly suitable for taxpayers who actively plan investments and spending.

New Tax Regime And Simplified Structure

The new regime offers reduced tax rates but fewer exemptions, making it attractive to those who prefer a straightforward system without extensive paperwork. For FY 2024–25, resident individuals with taxable income up to ₹7 lakh receive a rebate of up to ₹25,000 under Section 87A, effectively reducing their liability to zero.

In addition, a standard deduction of ₹75,000 is available to salaried individuals. Employer contributions towards the National Pension Scheme can also be deducted under Section 80CCD(2), up to 14% of salary. Interest payments on housing loans for let-out properties are deductible without any maximum cap, a feature not available in the case of self-occupied homes.

Contributions And New Provisions

Another important benefit under the new framework is the allowance of deductions for contributions made under the Agnipath Scheme. Financial experts advise that those who do not have high investment-linked deductions may find the new regime simpler and more rewarding due to the lower tax slabs and direct approach.

Choosing Between The Two

The decision between the old and new regimes ultimately depends on a taxpayer’s income composition, level of investments and lifestyle. Those with significant deductions through insurance, housing loans, medical policies or retirement planning often benefit more from the old regime. On the other hand, individuals without extensive investments or with higher salaries may find the new regime efficient and transparent.

With the new deadline set for 15 September, taxpayers now have a crucial window to assess their financial profile carefully. According to experts, early planning and consultation can help in avoiding last-minute errors and ensuring maximum tax efficiency.

Disclaimer: This article is intended for informational purposes only. It does not constitute financial advice. Taxpayers are advised to consult qualified experts or financial advisors to understand the most suitable tax regime and deductions for their individual circumstances.