There Is No Universal 'Better' Regime
The Old and New tax regimes serve different situations. Old Regime allows 80C, 80D, HRA, home loan interest, LTA, and other deductions but has higher tax slabs. New Regime has lower slabs and ₹75,000 standard deduction but removes most deductions. Which is better for you depends on your income, investments, rent, and home loan. This guide explains both regimes clearly and helps you decide based on your numbers—not on generic advice. Focus is solely on the tax regime comparison and decision-making.
Key Takeaways
- Depends on your numbers: Income, 80C, 80D, HRA, home loan. Run both and compare
- Old wins when deductions (80C+80D+HRA+others) are high, often ₹2.5L+
- New wins when deductions are low, no rent, no home loan, or income up to ₹15L with few investments
- Switch yearly: Choice is per financial year. Recalculate each year
- Use a calculator: Don't guess. Tax Regime Calculator gives exact comparison
Old Tax Regime Explained
Under the Old Regime, you can claim standard deduction (₹50,000), Section 80C (up to ₹1.5L), Section 80D (up to ₹25K–75K), HRA exemption (based on rent, basic, actual HRA), LTA, home loan interest (up to ₹2L), and other 80-series deductions. Tax slabs are 5% (₹2.5–5L), 20% (₹5–10L), 30% (above ₹10L). Rebate 87A: zero tax if total income after deductions is up to ₹5L. Suits those with significant investments and rent.
New Tax Regime Explained
Under the New Regime (default from FY 2023-24), you get standard deduction of ₹75,000 and employer NPS contribution deduction. No 80C, 80D, HRA, LTA, or home loan interest for most. Slabs are lower: 5% (₹3–7L), 10% (₹7–10L), 15% (₹10–12L), 20% (₹12–15L), 30% (above ₹15L). Rebate 87A: effective zero tax up to ₹7L income (₹12L with standard deduction). Suits those with minimal deductions who prefer simplicity.
Break-Even: When Do the Regimes Give Same Tax?
Break-even depends on income and deductions. Roughly: at ₹10L income, if deductions exceed ₹2–2.5L, Old often wins. At ₹15L, if deductions exceed ₹3L, Old often wins. At ₹20L+, Old tends to win if you have 80C, 80D, HRA, and home loan interest. These are illustrative; your case may differ. Always calculate with actual figures.
Decision Framework
- Step 1: List your gross income, 80C, 80D, HRA (actual rent, basic), home loan interest, other deductions.
- Step 2: Use Tax Regime Calculator. Enter all values for both regimes.
- Step 3: Compare total tax. Choose the regime with lower tax.
- Step 4: Opt for Old Regime (if chosen) via Form 10IE or employer declaration. Otherwise New applies by default.
- Step 5: Re-run next financial year. Income and deductions change.
Common Scenarios
- ₹8L, rent ₹15K, 80C ₹1L, 80D ₹25K: Old often wins. HRA + 80C + 80D add up.
- ₹12L, no rent, 80C ₹1.5L only: Could go either way. New may win due to lower slabs.
- ₹18L, rent ₹25K, 80C ₹1.5L, 80D ₹50K, home loan interest ₹2L: Old usually wins. Deductions are large.
- ₹6L, minimal investments: New wins. Rebate 87A makes tax zero up to ₹7L.
How to Opt for Old Regime
File Form 10IE before the due date or declare to your employer. Employer will apply Old Regime for TDS. When filing ITR, select Old Regime. If you do nothing, New Regime applies by default.
Use Our Tax Regime Calculator
Enter income, 80C, 80D, HRA, home loan interest, and other details. Get tax under both regimes and a clear recommendation. Update when salary or investments change.
Disclaimer
Tax rules are subject to change. Verify with current law. Consult a CA for personalised advice.