Filing ITR in 2025? Here’s Why Choosing the New Tax Regime by Default Could Be a Costly Mistake
As the September 15, 2025 deadline for income tax return (ITR) filing approaches, salaried taxpayers must make a critical decision—which tax regime to choose for financial year 2024–25. With the government promoting the new tax regime as the default, many are inclined to stick with it. But doing so blindly could result in higher tax outgo than necessary.
Here’s the catch: The much-publicized rebate on income up to ₹12 lakh under the new regime—announced in Budget 2025—only comes into effect from April 1, 2025. That means the current filing season, for FY 2024–25, is still governed by the older tax rules.
“Just because it’s default doesn’t mean it’s right. Always compare both regimes,” advises Mumbai-based CA Balwant Jain. For many taxpayers with housing rent allowance (HRA) and deductions under sections like 80C and 80D, the old regime often results in lower tax liability.
📊 Why the Old Tax Regime May Still Work in Your Favor
Under the old regime, you can claim a range of deductions such as:
- ₹1.5 lakh under Section 80C (PPF, ELSS, life insurance, tuition fees, etc.)
- Health insurance premiums under Section 80D
- Home loan interest under Section 24(b)
- HRA exemption for rented accommodation
- Standard deduction of ₹50,000
If you’ve planned your taxes wisely, your total deductions could exceed ₹3–4 lakh, tipping the scales in favor of the old regime.
Neeraj Agarwala, Partner at Nangia & Co LLP, emphasizes, “Despite the government’s push for the new regime, the old regime remains beneficial for many—especially those availing significant deductions.”
🧮 Real-World Comparison
- At a gross income of ₹15 lakh, you’ll need at least ₹4 lakh in deductions for the old regime to be more tax-efficient.
- At ₹20 lakh+ income, aim for ₹4.5 lakh+ deductions to stay ahead with the old regime.
Most salaried individuals who pay for home loans, rent, and insurance already cross these deduction thresholds—often without realizing it. Yet, many still default to the new regime, unaware they’re giving up those savings.
⏳ Timing Matters: Rebate Starts Next Year
The ₹12 lakh rebate is applicable from FY 2025–26, so you’ll benefit from it only when filing your return in 2026. For the current filing cycle, you must actively select the old regime if it benefits you—the system will not prompt you.
✅ What You Should Do
- Review all your eligible tax-saving investments and expenses
- Use an online tax calculator to compare both regimes
- Consult a tax expert if needed
- If the old regime offers better savings, make sure to manually opt for it during ITR filing
💡 Final Takeaway
Don’t let the default setting decide your taxes. While the new regime may appeal from FY 2025–26 onward, for FY 2024–25, the old regime still offers substantial tax advantages for those who’ve invested smartly. Compare your numbers—and file wisely.
