New Tax Regime vs Old Tax Regime: Which One Saves You More?
Since FY 2023-24, India runs two parallel income tax regimes. The new regime is the default with lower slab rates but almost no deductions. The old regime keeps higher slabs but lets you claim 80C, 80D, HRA, and home loan interest. The right choice depends on your deductions, not your income.
Side-by-side comparison table
| Factor | New Regime | Old Regime |
|---|---|---|
| Default regime (FY 2025-26) | Default (auto-applied) | Must explicitly opt in |
| Lowest taxable income bracket | ₹0-4L: 0% | ₹0-2.5L: 0% |
| Mid bracket | ₹8-12L: 10% | ₹5-10L: 20% |
| Highest standard bracket | ₹24L+: 30% | ₹10L+: 30% |
| Section 87A rebate | Zero tax up to ₹12L | Zero tax up to ₹5L |
| Standard deduction (salary) | ₹75,000 | ₹50,000 |
| 80C (PPF, ELSS, EPF, etc.) | Not allowed | ₹1.5 lakh deduction |
| 80CCD(1B) NPS extra | Not allowed | ₹50,000 deduction |
| 80D health insurance | Not allowed | ₹25K-1L deduction |
| HRA exemption | Not allowed | Fully allowed |
| Home loan interest (self-occupied) | Not allowed | ₹2L deduction |
| Employer NPS 80CCD(2) | Allowed | Allowed |
When the new regime wins
Below ₹15 lakh income with limited deductions: the new regime wins comfortably. The 87A rebate takes taxable income up to ₹12L to zero tax — far more generous than the old regime's ₹5L cap — and marginal relief smooths the step just above it. At ₹10L income with no deductions, the new regime costs nothing at all, against roughly ₹1.07 lakh under the old regime.
Freelancers, consultants, and self-employed without major deductions: new regime is simpler and lower tax. The complexity of tracking 80C investments + 80D premium + HRA receipts is replaced by a clean slab calculation.
When the old regime wins
Above ₹15-20 lakh income with full 80C + 80CCD(1B) + 80D + HRA + home loan interest claimed: old regime usually wins by ₹30K-1L per year. At ₹25L income with ₹6L of total deductions claimed, old regime saves ~₹50K vs new.
Salaried with home loan and rented previous accommodation: HRA + home loan interest can combine for ₹4-5L of deductions in transition years, making old regime decisively better. Senior citizens with significant 80D health insurance + LIC premium also benefit from old regime.
The cutoff: how much deduction does old regime need to win?
Rough rule of thumb: old regime needs roughly ₹3.75 lakh of deductions on top of the standard deduction to break even with new regime. ₹1.5L (80C) + ₹50K (NPS) + ₹50K (80D family senior) + ₹1.25L (HRA average) ≈ ₹3.75L. If you can't comfortably hit that, new regime is the simpler choice.
Salary structure matters too. If your basic is ₹50K/month and HRA is ₹25K/month, claiming HRA exemption alone gives ~₹3L deduction in metros. Combined with 80C/80D, old regime wins handily.
Run both calculations every year
The Indian income tax calculator on this site computes both regimes and shows the rupee difference. Run it once a year in March before submitting your tax declaration to your employer (so payroll applies the optimal regime for TDS) and again at filing.
Salaried individuals can switch regimes every year — there's no lock-in. Business/professional income lets you switch once in a lifetime to new regime, then it becomes permanent. Make the choice deliberate, not by default.
Frequently asked questions
Which tax regime is better — new or old?+
It depends on your deductions, not your income. As a rule of thumb: if your total deductions (80C + 80D + HRA + home-loan interest + NPS) exceed roughly ₹3.75-4 lakh, the old regime usually wins; below that, the new regime's lower slab rates pay more. Run both in an income tax calculator before choosing.
Is the new tax regime the default?+
Yes — since FY 2023-24 the new regime is the default. Salaried employees can switch between regimes every year at filing time; business-income taxpayers can switch back to the old regime only once in a lifetime.
What deductions survive in the new regime?+
The standard deduction (₹75,000 for salaried), employer's NPS contribution under 80CCD(2), employer EPF contributions, and gratuity/leave-encashment exemptions. HRA, 80C, 80D, LTA, and home-loan interest on self-occupied property are all unavailable.
At what salary does the new regime become better?+
There's no fixed salary cutoff — it's a deductions question. A ₹20 lakh earner with rent, home loan, and full 80C often saves more in the old regime; a ₹20 lakh earner with no rent and no investments almost always does better in the new regime.
Can I switch regimes every year?+
Salaried taxpayers: yes, choose at ITR filing each year regardless of what you told your employer (excess TDS comes back as refund). Taxpayers with business income: switching back to the old regime is allowed only once.
Related calculators
Income Tax India
Calculate India income tax under both Old and New regimes side-by-side. See which regime saves more, with 87A rebate, cess, and standard deduction applied.
Open80C Saver
Calculate the actual tax saved from your 80C, 80CCD(1B) NPS, and 80D health insurance deductions across all old-regime tax slabs.
OpenHRA Exemption
Calculate your House Rent Allowance (HRA) exemption under section 10(13A). Compare actual rent paid, HRA received, and salary-based limits.
OpenSalary Hike
Calculate your real take-home increase after a salary hike, factoring tax slabs, surcharge tiers, and the 87A rebate taper across old and new regimes.
Open