Tax Slabs — Side by Side Comparison
Here are the income tax slabs for FY 2025-26 (AY 2026-27) under both regimes:
| Income Slab | Old Regime Rate | New Regime Rate |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5L – ₹3L | 5% | Nil |
| ₹3L – ₹5L | 5% | 5% |
| ₹5L – ₹7L | 20% | 5% |
| ₹7L – ₹10L | 20% | 10% |
| ₹10L – ₹12L | 30% | 15% |
| ₹12L – ₹15L | 30% | 20% |
| Above ₹15L | 30% | 30% |
At first glance, the New Regime looks clearly better — but that ignores the deductions available only under the Old Regime.
Deductions Available Under Old Regime Only
- Section 80C (₹1.5L): PPF, ELSS, EPF contribution, life insurance, home loan principal, tuition fees, NSC, tax-saver FDs
- Section 80D (₹25K-₹1L): Health insurance premium for self, family, and parents (higher limits for senior citizens)
- HRA Exemption: Can be substantial — ₹1.5-3 lakh for those paying rent in metro cities
- LTA (Leave Travel Allowance): Domestic travel expenses exempt twice in 4 years
- Home Loan Interest (Section 24b): Up to ₹2 lakh per year on self-occupied property
- Section 80CCD(1B): Additional ₹50,000 for NPS investment
- Section 80TTA/80TTB: Savings account interest up to ₹10,000 (₹50,000 for seniors)
What the New Regime Allows
The New Regime is not entirely deduction-free. You can still claim:
- Standard Deduction: ₹75,000 (increased from ₹50,000 in Budget 2024)
- Employer NPS Contribution (80CCD(2)): Up to 14% of Basic Salary (Central Govt) or 10% (others)
- Family Pension Deduction (Section 57): ₹15,000 or 1/3rd of pension, whichever is lower
- Rebate under 87A: Full rebate if taxable income is up to ₹7 lakh (zero tax)
Break-Even Analysis — When Does Old Regime Win?
Let us compare the tax liability for a salaried person earning ₹15 lakh CTC:
| Scenario | Old Regime Tax | New Regime Tax | Better Option |
|---|---|---|---|
| No deductions claimed | ₹2,62,500 | ₹1,45,600 | New Regime |
| ₹2L deductions (80C + 80D) | ₹2,02,500 | ₹1,45,600 | New Regime |
| ₹3.5L deductions (80C + 80D + NPS) | ₹1,57,500 | ₹1,45,600 | New Regime (marginal) |
| ₹4.25L+ deductions (above + HRA) | ₹1,35,000 | ₹1,45,600 | Old Regime |
| ₹6L+ deductions (above + home loan) | ₹82,500 | ₹1,45,600 | Old Regime (big win) |
💡 Rule of Thumb
If your total deductions (80C + 80D + HRA + home loan interest + NPS) exceed ₹3.75 to ₹4.25 lakh per year, the Old Regime almost always saves more tax. If your deductions are below ₹2.5 lakh, the New Regime is better. Between ₹2.5L and ₹4L, calculate both before deciding.
Who Should Choose the New Regime?
- Young professionals who do not yet invest in PPF, ELSS, or NPS
- People living in their own home (no rent = no HRA benefit)
- Those without home loans or health insurance
- Anyone earning under ₹7 lakh — the full rebate makes it zero tax regardless
- Employees whose CTC structure has minimal HRA component
Who Should Stick With the Old Regime?
- Salaried employees paying rent in metro cities (HRA alone can be ₹2-3 lakh)
- Home loan holders claiming ₹2 lakh interest deduction
- Those who invest ₹1.5 lakh in 80C + ₹50K in NPS + ₹25K in health insurance
- Senior citizens with higher 80D and 80TTB limits
- Employees with employer NPS contribution + personal NPS + full 80C utilisation
⚠️ Don't Forget Cess and Surcharge
Both regimes add 4% Health & Education Cess on the computed tax. For income above ₹50 lakh, surcharge applies (10-37% depending on income level). These are identical under both regimes, so they do not change which regime is better — but they do increase your actual tax paid.
How to Decide — Step by Step
- List all your deductions: 80C, 80D, HRA, home loan interest, NPS, LTA, any others
- Calculate total deductions available under Old Regime
- Compute tax under both regimes using a calculator (manual comparison is error-prone)
- Compare the final tax — choose whichever is lower
- Inform your employer at the start of the financial year for correct TDS deduction
Compare Both Regimes Instantly
Enter your salary and deductions — see exact tax under both regimes side by side.
Use Income Tax Calculator →How We Research and Update This Guide
We cross-check formulas, slabs, and examples against published government, regulator, lender, and scheme documentation before updating the page.
- Official government notifications, tax guidance, and scheme rules are checked before formulas or explanatory text are updated.
- Worked examples are recalculated manually and matched against the on-page tool where relevant.
- Whenever rules change, the page date and examples should be revised together to avoid stale guidance.
Frequently Asked Questions — Old vs New Tax Regime
The Old Tax Regime has higher tax rates but allows deductions under Section 80C, 80D, HRA, LTA, home loan interest, and others. The New Tax Regime offers lower tax rates and a higher rebate (up to ₹7 lakh) but removes almost all deductions and exemptions. Your total deductions determine which regime saves more tax.
Yes, salaried employees can choose between Old and New Regime every financial year. You inform your employer at the start of the year, and you can change your final choice when filing your ITR. Self-employed individuals and business owners have a one-time choice with limited switching ability.
Yes, from FY 2023-24 onwards, the New Tax Regime is the default regime. If you do not explicitly choose the Old Regime when filing your ITR, the New Regime is automatically applied. You must actively opt for the Old Regime if you want to claim deductions.
For most salaried individuals, the break-even is approximately ₹3.75 lakh to ₹4.25 lakh in total deductions (80C + 80D + HRA + home loan interest + NPS). If your total deductions exceed this amount, the Old Regime typically saves more tax. Below this, the New Regime is better.
The New Regime allows only a few deductions: standard deduction of ₹75,000 (from FY 2024-25), employer NPS contribution under Section 80CCD(2), and deduction for family pension under Section 57. All other major deductions — 80C, 80D, HRA, LTA, home loan interest — are not available.