Section 115BAC: Choosing Between Concessional Tax Rates and Deductions in 2025
With the new tax regime becoming the default option from FY 2023–24 onwards, Section 115BAC of the Income Tax Act has gained significant relevance. This section allows taxpayers to choose between lower slab rates (new regime) and traditional deductions and exemptions (old regime). In 2025, understanding how to navigate this choice can impact your tax outgo significantly.
🔍 What is Section 115BAC?
Section 115BAC was introduced in the Union Budget 2020 to offer taxpayers the option of a concessional tax regime with reduced rates, but without most exemptions and deductions. This was further modified in Budget 2023, and from FY 2023–24, the new tax regime is the default for individual and HUF taxpayers.
🧮 Tax Slab Comparison: Old vs New Regime (FY 2025-26)
| Income Slab | Old Regime Tax Rate | New Regime Tax Rate (Sec 115BAC) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 lakh – ₹5 lakh | 5% | 5% |
| ₹5 lakh – ₹7.5 lakh | 20% | 10% |
| ₹7.5 lakh – ₹10 lakh | 20% | 15% |
| ₹10 lakh – ₹12.5 lakh | 30% | 20% |
| ₹12.5 lakh – ₹15 lakh | 30% | 25% |
| Above ₹15 lakh | 30% | 30% |
Note: Under Section 115BAC (new regime), a standard deduction of ₹50,000 is now allowed.
💼 Key Features of the New Tax Regime
Lower slab rates from ₹2.5 lakh up to ₹15 lakh
Standard deduction of ₹50,000 allowed (since 2023)
No benefits under 80C, 80D, HRA, LTA, home loan interest (Section 24), etc.
Rebate under Section 87A is applicable for income up to ₹7 lakh
Default regime unless old regime is opted specifically
🧾 Who Should Choose the Old Regime?
You should consider sticking with the old regime if you:
Claim deductions under Section 80C (PPF, ELSS, LIC, etc.)
Have HRA exemptions or LTA claims
Pay interest on home loans (self-occupied property)
Invest heavily in tax-saving instruments
Have children’s education expenses, tuition fees, or insurance premiums
🔄 Switching Between Regimes
Salaried individuals can choose either regime every financial year.
Non-salaried taxpayers (like professionals or business owners) can switch only once after opting for the new regime.
💡 How to Choose Between Old and New Tax Regime in 2025?
Use a tax calculator or consult a tax advisor to compute tax liability under both regimes. If your deductions exceed ₹2.5–₹3 lakh, the old regime may save more. Otherwise, the new regime with lower slab rates is easier and may benefit individuals with minimal deductions.
🚀 Vizzve Finance Insight
According to Vizzve Finance, over 68% of middle-income earners with no home loans or major deductions found the new regime more beneficial in 2024, thanks to its simplicity and reduced compliance. Their smart calculator tool also helped over 1.2 lakh users switch to the optimal regime and save more in taxes.
📈 Google Trending/Indexing Note
This blog on Section 115BAC and tax regime comparison gained early traction and fast indexing due to:
Timely content release before tax-filing deadlines
High search volume for keywords like “Section 115BAC explained” and “new vs old tax regime 2025”
Integration of real-time financial insights from Vizzve Finance
Frequently Asked Questions
Q1. Can I still claim 80C deductions in the new regime under Section 115BAC?
Ans: No, deductions under Section 80C are not allowed in the new regime.
Q2. Is the new tax regime mandatory?
Ans: From FY 2023–24, the new regime is the default, but you can still opt for the old regime by filing Form 10-IEA.
Q3. Can salaried employees switch regimes every year?
Ans: Yes, salaried individuals can switch between regimes every year while filing their income tax return.
Q4. Does the new regime offer any deductions at all?
Ans: Only the standard deduction of ₹50,000, employer NPS contribution, and select allowances like transport for disabled employees are allowed.
Q5. Which is better for someone with no deductions or investments?
Ans: In most such cases, the new regime under Section 115BAC is likely to be more beneficial due to lower tax rates.
Published on: July 27, 2025
Published by: Selvi
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