Published: May 2026 · 7 min read · Updated for Budget 2025
The Big Picture
Since FY 2023-24, the new tax regime is the default for all taxpayers. It offers lower slab rates but eliminates most deductions and exemptions. The old regime retains higher rates but lets you claim deductions under Chapter VI-A (80C, 80D, etc.), HRA exemption, home loan interest, and more.
The right choice depends entirely on your specific deduction profile. There's no universally "better" regime — it's a math problem.
Rate Comparison
Visit our tax slab reference page for the complete tables. Here's the key difference:
- New regime: Tax-free up to ₹4 lakh, then 5%→10%→15%→20%→25%→30% in ₹4L slabs. Section 87A rebate makes income up to ₹12 lakh effectively tax-free. Standard deduction ₹75,000.
- Old regime: Tax-free up to ₹2.5 lakh (₹3L for seniors), then 5%→20%→30%. But you can claim all deductions.
What You Can Claim in Each Regime
Available in BOTH regimes
- Standard deduction (₹75,000 for salaried — new regime; ₹50,000 — old regime)
- Employer's NPS contribution under Section 80CCD(2) — up to 14% of basic salary
- Deduction for family pension (₹15,000 or 1/3rd, whichever lower)
- Gratuity, VRS, and leave encashment exemptions
Available ONLY in old regime
- Section 80C: ₹1,50,000 — PPF, ELSS, LIC, tuition fees, home loan principal
- Section 80D: ₹25,000 self + ₹25,000 parents (₹50,000 if senior) — health insurance
- Section 80CCD(1B): Additional ₹50,000 for NPS
- HRA Exemption: Based on rent paid, salary, and city (metro vs non-metro)
- Section 24(b): Home loan interest up to ₹2,00,000 for self-occupied property
- Section 80G: Donations to approved charities (50% or 100% deduction)
- Section 80E: Education loan interest (no limit)
- Section 80TTA/80TTB: Savings account interest (₹10,000 / ₹50,000 for seniors)
Break-Even Analysis
The question is simple: at what level of deductions does the old regime save more tax than the new regime?
Rule of thumb: If your total deductions (80C + 80D + HRA + home loan + others) exceed approximately ₹3.75 lakh, the old regime likely saves more. Below that, stick with the new regime.
Example 1: Salaried, ₹15L CTC, minimal deductions
- Deductions: 80C (₹1.5L) + 80D (₹25K) = ₹1.75L
- New regime tax: ₹1,09,200
- Old regime tax: ₹1,40,400
- Winner: New regime (saves ₹31,200)
Example 2: Salaried, ₹20L CTC, home loan + full deductions
- Deductions: 80C (₹1.5L) + 80D (₹50K) + HRA (₹2.4L) + Home loan (₹2L) + NPS (₹50K) = ₹6.9L
- New regime tax: ₹2,49,600
- Old regime tax: ₹1,87,200
- Winner: Old regime (saves ₹62,400)
Who Should Choose What?
New regime is better for you if:
- You don't have a home loan
- You live in own house (no HRA benefit)
- Your employer already contributes to NPS
- Your total deductions are under ₹3.75 lakh
- You want simplicity and don't want to manage investment proofs
Old regime is better for you if:
- You pay significant rent in a metro city (high HRA benefit)
- You have a home loan with substantial interest (₹2L deduction)
- You invest the full ₹1.5L in 80C + ₹50K in NPS
- You have health insurance for self + parents (₹50K–₹1L in 80D)
- Your total deductions exceed ₹3.75 lakh
How to Switch Between Regimes
- Salaried (no business income): You can switch every year at the time of filing your ITR — no prior declaration needed.
- Business/professional income: You can opt out of the new regime once. Once you switch to old, you cannot come back to new regime (one-time choice under Section 115BAC).