Best of both worlds: How couples can plan taxes to make the most of old and new regimes
After Budget 2025 generously slashed tax rates across all income ranges in the new tax regime, the general consensus is that the old regime is a thing of the past. Well, not yet for those paying rent.
Tax-saving component of the house rent allowance (HRA) makes the old tax regime more beneficial in some cases. One such case is of married couples, who can use HRA strategically to save tax based on their salary and tax slabs.
Also read: Goodbye old tax regime; new regime now more attractive
After Budget 2025, the break-even limits— minimum deductions needed to make the old tax regime worthwhile—have nearly doubled. For incomes above ₹24 lakh, taxpayers now need at least ₹8 lakh in deductions and exemptions to save more under the old system. With other tax benefits too small to bridge the gap, HRA remains the key tool to reach this threshold.
However, rent would need to be really high for HRA to tip the balance in the old regime’s favour. This is because the popular deductions of 80C, medical insurance, and NPS along with ₹50,000 standard deduction can give you tax-exempt income of only upto ₹2.75 lakh. The remaining ₹5.25 lakh has to come from big components like HRA or car lease.
Nitesh Buddhadev says car lease is not a widely available option as only a select big companies extend this benefit to their employees in managerial positions.
Apart from those earning high salaries, double income families living in a city like Mumbai, Gurgaon, or Bangalore also end up shelling out a huge amount in rent. But, many couples split bills to ensure that the burden of household expenses doesn’t fall on one, especially big expenses such as rent, but also so that both can get the benefit of HRA.
Also read: New tax regime: Deductions
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