Old Tax Regime vs New Tax Regime

India's most confusing annual tax decision — explained with numbers so you can decide in 2 minutes.

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Old Tax Regime

Lower slab rates with the benefit of deductions (80C, HRA, NPS, home loan interest). Better if you have significant investments.

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New Tax Regime

Higher slab rates but zero deductions. Better for people with few investments. Standard deduction of ₹75,000 and ₹12L rebate make it attractive.

Feature	Old Tax Regime	New Tax Regime
Standard Deduction	₹50,000	₹75,000
80C Deduction	Up to ₹1.5L	Not available
HRA Exemption	Available	Not available
NPS (80CCD 1B)	Extra ₹50,000	Not available
Home Loan Interest	Up to ₹2L (Sec 24)	Not available
Zero Tax Threshold	₹5L (with 87A)	₹12L (with 87A)
Slab 0–3L	Nil	Nil
Slab 3–7L	5%	5%
Slab 7–10L	20%	10%
Slab 10–12L	30%	15%
Slab 12–15L	30%	20%
Above ₹15L	30%	30%

🏆 Verdict

For FY 2025-26: if your deductions under 80C + HRA + home loan + NPS exceed ₹3.75L, the old regime likely saves more. Below that threshold, the new regime is almost always better due to the ₹12L rebate and lower slab rates.

Choose Old Tax Regime when…

✓You have ₹1.5L in 80C investments (PPF, ELSS, LIC, EPF top-up).
✓You live in rented accommodation and claim HRA.
✓You have a home loan with significant interest deduction.
✓You contribute to NPS and claim the extra ₹50,000 deduction.
✓You have LTA, medical reimbursement and other perquisite exemptions.

Choose New Tax Regime when…

✓You do not invest significantly under 80C.
✓You live in your own home and have no HRA.
✓Your income is between ₹7L and ₹12L (zero tax due to rebate).
✓You want simplicity without tracking all deductions.
✓You are a freelancer or business owner without salary perquisites.

Frequently Asked Questions

Can I switch between regimes every year?

Salaried individuals can switch regimes every financial year when filing ITR. Business owners who have opted out of the new regime cannot switch back easily.

Which regime is default for salaried employees?

From FY 2023-24, the new regime is the default. You must explicitly opt out to use the old regime by submitting Form 12BB to your employer.

At what income is old regime better?

Generally, if your total deductions exceed ₹3.75L (for the ₹10–15L bracket), the old regime saves more. Use our Income Tax Calculator to compare with your exact numbers.

Still not sure? Run the numbers.

Use our free calculator to compare with your actual income and deductions.

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