Old vs New Tax Regime: Which Should You Choose?
A plain-language comparison of India's two income tax regimes, with the deduction break-even point and a checklist for deciding.
Every salaried taxpayer in India has to pick between two ways of paying income tax. The new regime has lower slab rates but almost no deductions. The old regime has higher rates but lets you subtract investments and expenses such as Section 80C, health insurance, HRA and home-loan interest. The better choice depends on how much you can actually deduct.
The main differences
| New regime | Old regime | |
|---|---|---|
| Basic exemption | Up to ₹4 lakh nil | Up to ₹2.5 lakh nil |
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 87A rebate | Tax nil up to ₹12 lakh taxable income | Tax nil up to ₹5 lakh taxable income |
| 80C, 80D, HRA, home-loan interest | Not available | Available |
| Top rate | 30% above ₹24 lakh | 30% above ₹10 lakh |
When the old regime still wins
Because the new regime gives a very high tax-free limit and lower slabs, it wins for most people. The old regime tends to win only when total deductions are large relative to income. Typical combinations that add up are:
- Section 80C investments up to ₹1.5 lakh (EPF, PPF, ELSS, life insurance premium, home-loan principal).
- Health insurance under Section 80D.
- HRA exemption, if you pay significant rent. Try our HRA calculator.
- Home-loan interest on a self-occupied property, within the legal limit.
- Extra NPS contribution under 80CCD(1B). See the NPS calculator.
As a rough guide, if your claimable deductions are below about ₹3–4 lakh, the new regime is usually cheaper. If you have a home loan and pay high rent and invest the full 80C limit, run the numbers before deciding.
How to decide in two minutes
- Add up every deduction you can genuinely claim for the year.
- Enter your gross income and the deduction total in the income tax calculator.
- Pick the regime that shows lower tax.
- Tell your employer your choice at the start of the year; you can still switch when you file your return if you are a salaried taxpayer.
Do not buy products just for the deduction
Locking money into an insurance policy you do not need to save a few thousand rupees of tax is rarely wise. Choose investments for their own merits, such as PPF for safe long-term savings or a SIP in equity funds for growth, and treat the tax benefit as a bonus.
Rates and limits are taken from public Budget summaries and can change. Confirm with the Income Tax Department before filing.
Frequently asked questions
Can I switch regimes every year?
Salaried individuals can choose a regime each financial year. Taxpayers with business or professional income have limits on switching back to the new regime.
Is the new regime the default?
Yes. If you do not choose, the new regime applies by default.
More guides
Calculators
Last reviewed: October 2026. General education, not financial advice.