New Income Tax Slab vs. Old: Which Works Better with ROP Term Plans?

It’s not a matter of which regime is “better.” Some people prefer a clean, deduction-free approach. Others still benefit from claiming exemptions through investments and premiums. Where you fall in the income tax slab for FY 2025-26 can quietly shape how much money stays with you and how your insurance fits into the plan.

Understanding the Income Tax Slab Choices for FY 2025-26

The latest Budget in July 2024 left the old regime untouched but introduced a few updates to the new system. It was a clear sign that the government wanted more people to move over to the newer structure. But if you're someone weighing your tax savings against future security, the picture isn’t so simple.

Annual Taxable Income	Old Regime	New Regime (FY 25-26)
Up to ₹2.5 lakh	Nil	Nil
₹2.5L – ₹5 lakh	5%	5% (up to ₹3L is nil)
₹5L – ₹7L	20%	5% (with rebate under Section 87A)
₹7L – ₹9L	20%	10%
₹9L – ₹12L	20%	15%
₹12L – ₹15L	30%	20%
Above ₹15L	30%	30%

At first glance, the new income tax slab looks more appealing for lower and middle-income groups. There’s slightly more tax relief in the mid-range and fewer deductions to keep track of. But the trade-off is that you can’t claim many of the exemptions and deductions that the old regime allows, including the ones linked to life insurance premiums.

How Tax Planning Changes When You Use ROP Term Plans

If you’ve ever considered a term insurance plan with returnof premium, you already know it’s a mix of life cover and a guaranteed payout if you outlive the term. The premiums are usually higher than pure-term policies, but there’s a return on maturity, which adds a layer of savings to your protection.

Here’s where the choice of tax regime really matters. In the old tax regime, premiums paid toward life insurance policies, including ROP plans, are eligible for deduction under Section 80C (only under the old tax regime) up to ₹1.5 lakh in a year. The maturity benefit, under certain conditions, may also be tax-free under Section 10(10D).

But in the new tax regime, these deductions are not available. That means if you’re paying a premium of say, ₹50,000 per year for a TROP, you don’t get to reduce your taxable income by that amount. Over a 10- or 15-year policy term, that difference in deductions can add up.

This is one of the reasons premium insurance providers like Axis Max Life Insurance continue to see a strong uptake of TROP plans under the old tax regime. The tax deduction plays a meaningful role in making the plan more cost-effective in the long run.

How to Compare Outcomes with a Calculator

Most people try to estimate all this in their heads or through a spreadsheet. But there’s a better way. A good investment calculator can help you see which tax regime works best for your current income and deduction profile. These tools are especially helpful if you’re factoring in life insurance premiums, housing loans, and other deductions.

Let’s say you input your income, TROP premium, and PPF contribution into an investment calculator. It will instantly show you your taxable income under both regimes and tell you where you pay less tax. You can tweak the figures to check what happens if you increase your premium, reduce your deductions, or switch jobs.

This gives you a data-backed, real-world view with no guesswork and no assumptions. You’ll know whether that ₹60,000 premium is working hard enough for you, not just in life cover, but in tax savings too.

Aligning Long-Term Insurance with Tax Strategy

A good financial plan is rarely built on short-term gains. It needs to hold up 10 or 20 years down the line. Many policyholders prefer tools like a term insurance plan with return of premium, especially when their tax planning is already aligned with the old regime.

The idea is to extract value from both ends: protection during the policy term and money back if you outlive it. The tax benefits under the old slab structure make the entire proposition more rewarding. It’s not just about saving tax once but also about recurring benefits each year, plus the maturity amount later.

But that doesn’t mean the new regime has no takers. For those whose income is below ₹7 lakh and who don’t invest heavily in Section 80C (only under the old tax regime) instruments, the new income tax slab regime offers a rebate and streamlined process. It’s ideal for younger earners or gig workers who prefer flexibility over commitment.

When Does the New Regime Make Sense?

Here’s where the details come in. If you’re someone with limited tax-saving investments, say, no housing loan, no dependent parents, and minimal insurance premiums, the new regime’s simplified slabs can reduce your paperwork and slightly lower your tax outgo.

However, if you’re already paying for health insurance, contributing to NPS, and paying premiums for your term plan, those benefits go unused in the new regime. So it’s not just about choosing the “lower” tax rate; it’s about understanding where your money is going and what returns you expect over time.

Let’s also not forget how rising incomes can change the equation. Today, you might be earning ₹10 lakh a year, but five years down the line, you could be closer to ₹15 lakh. That’s when the new regime’s benefits begin to shrink unless your investment habits change too.

Which Regime Works Better with ROP Term Plans?

There’s no blanket answer. But here’s the simple way to think about it. If you’re already disciplined with your savings and deductions, especially your life insurance premiums, crossing ₹1.5 lakh annually, then the old regime continues offering better value. The tax savings plus the long-term return from a term insurance plan with return of premium can comfortably offset the higher premium you pay for the ROP benefit.

On the other hand, if you have minimal deductions or prefer financial flexibility without committing to fixed contributions, the new regime makes sense for now. But keep in mind, this choice isn’t permanent. The government allows taxpayers to shift between regimes once every financial year if they are salaried. Use that to your advantage.

Conclusion

Choosing between the new and old income tax slab structures isn’t just a tax call; it’s a lifestyle call. It depends on how you invest, how much you spend, and whether you value guaranteed benefits in the long run. If you already hold or are planning to buy a term insurance plan with return of premium, the old regime often makes the math work better in your favour. Especially when paired with other deductions.

But make that decision after looking at the numbers. Use an investment calculator. Check your expected outgo under both slabs. Understand how the premium fits in. The more clarity you build today, the more financial freedom you’ll enjoy tomorrow.

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Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to change. Please consult an expert before making any related decisions.

Tax benefit is subject to change as per the prevailing tax laws.