New Tax Regime vs Old Tax Regime: Which Should You Choose?
Under India’s new tax regime (default from FY 2024-25), your slab rates are lower but you lose most deductions. The right choice depends entirely on YOUR specific deductions. Here’s the honest math for typical Indian income profiles.
Slab rates comparison (FY 2026-27)
| Income slab | Old regime | New regime |
|---|---|---|
| Up to ₹2.5L (old) / ₹4L (new) | 0% | 0% |
| ₹2.5–5L (old) / ₹4–8L (new) | 5% | 5% |
| ₹5–10L (old) / ₹8–12L (new) | 20% | 10% |
| ₹10L+ (old) / ₹12–16L (new) | 30% | 15% |
| ₹16–20L (new) | n/a | 20% |
| ₹20–24L (new) | n/a | 25% |
| ₹24L+ (new) | n/a | 30% |
Deductions allowed
| Deduction | Old regime | New regime |
|---|---|---|
| Standard deduction (salaried) | ₹50,000 | ₹75,000 |
| HRA exemption | Yes (Section 10(13A)) | No |
| 80C (₹1.5L) | Yes | No |
| 80CCD(1B) NPS (₹50K) | Yes | No |
| 80D medical | Yes | No |
| Home loan interest (Sec 24b) | Yes (₹2L self-occupied) | Only for let-out |
| 80CCD(2) employer NPS | Yes | Yes (only common one) |
| Rebate u/s 87A | ₹12,500 up to ₹5L | ₹60,000 up to ₹12L |
Break-even analysis: who should pick which
Salary ₹7.5 LPA
New regime: 0 tax (87A rebate covers it). Old regime: 0 tax IF you have ₹1L+ deductions. Tie — new regime marginally wins by simplicity. Pick new.
Salary ₹12 LPA, no deductions
New regime: ₹0 tax (full 87A rebate at ₹12L taxable). Old regime: ~₹80,000 tax. New regime saves ₹80K.
Salary ₹15 LPA, ₹2.5L deductions (typical 80C + 80D + HRA)
| Old regime taxable income | ₹15L – ₹2.5L deductions – ₹50K std = ₹12L |
| Old regime tax | ₹1,17,000 + 4% cess = ₹1,21,680 |
| New regime taxable income | ₹15L – ₹75K std = ₹14.25L |
| New regime tax | ₹1,10,000 + 4% cess = ₹1,14,400 |
| New regime saves | ₹7,280 |
New regime wins even with ₹2.5L of deductions at this income level.
Salary ₹15 LPA, ₹5L deductions (heavy HRA + home loan interest)
| Old regime taxable income | ₹15L – ₹5L – ₹50K std = ₹9.5L |
| Old regime tax | ₹1,05,000 + 4% cess = ₹1,09,200 |
| New regime tax | ₹1,14,400 (same as above) |
| Old regime saves | ₹5,200 |
Old regime wins when deductions exceed ~₹4L.
Salary ₹30 LPA+
At high incomes, new regime slabs get aggressive (30% kicks in at ₹24L). Old regime’s 30% kicks at only ₹10L, but you can offset with deductions up to ₹2L home loan interest + ₹1.5L 80C + ₹50K 80CCD(1B) + ₹25K 80D + HRA. For anyone with deductions exceeding ₹5–6L/year, OLD regime still wins at high incomes.
The break-even deduction threshold
- Salary ₹10L: need ₹2L+ deductions to make old regime worthwhile
- Salary ₹15L: need ₹3.75L+ deductions
- Salary ₹20L: need ₹4.5L+ deductions
- Salary ₹30L: need ₹6L+ deductions
- Salary ₹50L+: need ₹8L+ deductions
Practical recommendation
- Run your specific numbers through our tax calculator. The calculator does the full math automatically.
- If your deductions are significantly below the break-even threshold, switch to new regime for simplicity.
- You can switch each year (for salaried individuals). Business income has fewer switching opportunities.
This is independent commentary, not tax advice. Consult a CA for specific filing.