Old vs New Tax Regime: Which Should You Choose?

Every salaried Indian now faces one recurring choice: file under the old tax regime or the new tax regime. The old regime keeps higher slab rates but lets you claim around 70 deductions and exemptions — Section 80C, HRA, home-loan interest, 80D and more. The new regime offers lower, wider slab rates but strips away almost all of those deductions, keeping only the standard deduction and a handful of others. Since Budget 2020 the gap has narrowed steadily, and as of FY 2025-26 the new regime is the default. This guide compares both so you can pick the one that leaves more money in your pocket. Once you have read it, run your own numbers in the Income Tax Calculator — it is the only reliable way to see which regime is cheaper for your income and deductions.

Quick Comparison: Old vs New Regime

Figures as of FY 2025-26 (AY 2026-27). Slab rates and rebates are revised in most Union Budgets — verify before filing.

New Regime Slabs — FY 2025-26

Thanks to the enhanced Section 87A rebate, a resident individual pays zero tax on taxable income up to ₹12 lakh here. With the ₹75,000 standard deduction, a salaried person earning up to about ₹12.75 lakh gross can owe nothing.

Old Regime Slabs — FY 2025-26

The old-regime slabs are unchanged for FY 2025-26. The basic exemption is ₹3 lakh for senior citizens (60–80) and ₹5 lakh for super-senior citizens (80+). The 87A rebate here makes tax nil only up to ₹5 lakh taxable income — but you can shrink your taxable income with deductions before that point.

The Break-Even Idea

Both regimes tax the same gross salary — the difference is what you subtract first. The old regime lowers your taxable income through deductions but then taxes the remainder at higher rates; the new regime skips the deductions but taxes at lower rates. So the question is: are your deductions large enough to beat the new regime's lower rates?

Because the new regime now exempts income up to ₹12 lakh, most salaried taxpayers earning below that are better off in the new regime — there is simply no tax to save. As income climbs above roughly ₹13–16 lakh, the old regime starts to compete, but usually only if you actually claim a hefty deduction stack: a full ₹1.5 lakh under Section 80C, up to ₹2 lakh of home-loan interest, HRA, 80D health premiums and NPS. As a rough guide, at higher incomes you typically need total deductions of around ₹4–5 lakh or more for the old regime to pull ahead. The exact tipping point shifts with your salary and rent, so treat this as direction, not gospel — and confirm it in the Income Tax Calculator.

Three Worked Examples

The numbers below are for a salaried individual below 60 in FY 2025-26. For the old regime we assume a common deduction stack of ₹1.75 lakh — a full ₹1.5 lakh under Section 80C plus ₹25,000 of 80D health premium — on top of each regime's standard deduction. Every figure includes the 87A rebate and the 4% cess.

With a moderate ₹1.75 lakh of deductions, the new regime wins at all three incomes. At ₹8 lakh it is decisive: the higher rebate wipes out tax entirely, while the old regime still charges ₹28,600 on ₹5.75 lakh of taxable income. The real question is how many deductions you can genuinely pile up.

That is where the break-even matters. To make the old regime merely match the new one, you would need old-regime deductions of about ₹2.5 lakh at ₹8 lakh gross, roughly ₹5.4 lakh at ₹15 lakh, and close to ₹8 lakh at ₹30 lakh. Below those thresholds the new regime stays cheaper; above them the old regime pulls ahead. Few salaried taxpayers reach ₹5–8 lakh of deductions unless they combine a full 80C, a large home-loan interest claim and substantial HRA — which is exactly why the new regime suits most people now. Confirm your own figure in the Income Tax Calculator.

Deductions That Tilt the Balance

Because the whole choice turns on deductions, it helps to know what the old regime lets you claim — and what carries into the new regime.

• Standard deduction. A flat cut for salaried people and pensioners — ₹75,000 in the new regime and ₹50,000 in the old. This is the one deduction both regimes give you.
• Section 80C — up to ₹1.5 lakh. Shared across EPF, PPF, ELSS, life-insurance premiums, five-year tax-saving FDs, NSC and home-loan principal. Old regime only. Check your existing EPF and home-loan principal before adding fresh investments.
• Section 80D — health insurance. Premiums for yourself and family, plus an extra slice for insuring parents. Old regime only.
• HRA — the least of three. Your exempt House Rent Allowance is the smallest of: the actual HRA received; rent paid minus 10% of basic (plus DA); and 50% of basic in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% elsewhere. Old regime only, and it can be large if you pay high rent.
• Home-loan interest — Section 24(b). Up to ₹2 lakh a year on a self-occupied house. Old regime only, and often the single biggest lever for pushing the old regime ahead.
• NPS — 80CCD(1B) vs 80CCD(2). Your own extra NPS contribution under 80CCD(1B), up to ₹50,000, is old regime only. But your employer's NPS contribution under 80CCD(2) — up to 14% of basic salary — is allowed under both regimes, so it lowers your tax either way.

Which Should You Choose?

Pros & Cons at a Glance

Run the Numbers Before You File

The regimes interact with your rent, home loan and investments in ways no rule of thumb fully captures. Enter your salary and deductions in the Income Tax Calculator to compare the exact tax under both regimes side by side. If you are still building your 80C stack, the PPF Calculator, SIP Calculator, Lumpsum Calculator and RD Calculator can help you plan where that money goes.

This page is for general information only and is not tax or financial advice. Tax rules change with each Union Budget; verify current slabs and rebates or consult a qualified tax professional before filing.