Since FY 2023-24, the new tax regime is the default — you're automatically in it unless you actively choose the old regime. The two regimes trade off in one direction: the new regime has lower rates but almost no deductions; the old regime has higher rates but lets you subtract a long list of deductions (80C, HRA, home loan interest, and more) before tax is calculated.
Which one wins comes down to a single question: how large are your actual deductions?
New regime: fewer deductions, lower rates
The new regime only allows a standard deduction of ₹75,000 (for salaried individuals) and gives a full tax rebate up to ₹12,00,000 in taxable income — meaning many middle-income earners pay zero tax under it. Beyond that threshold, tax is calculated slab-by-slab from 5% up to 30%, plus a 4% health and education cess.
Old regime: more deductions, higher rates
The old regime lets you claim Section 80C (up to ₹1,50,000 — PF, ELSS, life insurance, etc.), HRA exemption if you pay rent, home loan interest under Section 24, health insurance premiums under 80D, NPS contributions, and more. If these add up to a large number, the old regime's higher rates can still work out cheaper overall.
A worked example
Take a salaried individual with ₹15,00,000 gross annual income. Under the new regime (with the ₹75,000 standard deduction), the tax works out to about ₹97,500. For the old regime to match that, deductions would need to add up to roughly ₹5.94 lakh — which means substantial 80C investments, a home loan with meaningful interest, HRA, and health insurance all combined. Below that deduction level, the new regime comes out cheaper; above it, the old regime wins.
This crossover point shifts with income — it's not the same number for someone earning ₹8,00,000 versus ₹25,00,000. The only reliable way to know which regime is better for you is to calculate both with your actual numbers.
A quick way to decide
- If you don't have a home loan, don't pay significant rent, and don't invest heavily in 80C instruments, the new regime is very likely better for you.
- If you have a home loan on a self-occupied property, pay HRA-eligible rent, and max out 80C, it's worth calculating both — the old regime may still win.
Calculate both for your exact numbers
Use the Income Tax Calculator to compute your tax under both regimes with your actual income and deductions. If rent is one of your deductions, the HRA Exemption Calculator works out exactly how much of your HRA qualifies before you plug it into the old regime calculation.