Every year, the same question trips people up at tax-filing time: old regime or new regime? The honest answer is "it depends on your deductions" — but you can usually settle it in two minutes. Here's how.
The difference in one line
The new regime gives you lower tax rates but almost no deductions. The old regime has higher rates but lets you subtract a long list of deductions (80C, 80D, HRA, home loan interest, and more) before tax is calculated. So the new regime suits people with few deductions; the old regime rewards those who claim a lot.
New regime slabs (FY 2025-26 & 2026-27)
| Income slab | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Two things make the new regime very attractive for the middle class: a ₹75,000 standard deduction for salaried people, and a Section 87A rebate that makes tax zero up to ₹12,00,000 of taxable income — which works out to roughly ₹12.75 lakh of salary being effectively tax-free.
Old regime slabs
| Income slab | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The old regime has a smaller ₹50,000 standard deduction and an 87A rebate only up to ₹5,00,000. Its advantage is everything you can subtract before these slabs apply.
What you can deduct (old regime only)
- Section 80C — up to ₹1.5 lakh (EPF, PPF, ELSS, life insurance, home loan principal, etc.)
- Section 80D — health insurance premiums
- HRA — house rent allowance, if you pay rent
- Home loan interest — up to ₹2 lakh under Section 24(b)
- NPS — an extra ₹50,000 under 80CCD(1B)
The simple break-even rule
Because the new regime's rates are so much lower now, it wins for most people with modest deductions. The old regime only pulls ahead once your total deductions get large — broadly, when they cross roughly ₹3.5–4 lakh (think: full ₹1.5 lakh 80C + ₹2 lakh home loan interest + health insurance + HRA). Below that, the new regime almost always costs you less.
Rule of thumb: if you're a salaried person who only does basic 80C savings and has no home loan or rent claim, the new regime is very likely your best bet. If you have a big home loan plus a fully-loaded 80C and HRA, run both.
A quick example
On a ₹15 lakh salary with ₹1.5 lakh of deductions, the new regime costs about ₹97,500 in tax, while the old regime costs about ₹2,10,600 — the new regime saves over ₹1.1 lakh. But push deductions up toward ₹4 lakh and the gap narrows sharply.
How to decide in two minutes
Don't guess — the numbers depend on your exact income and deductions. Put both into the calculator and it shows you side by side which one saves more, including the standard deduction, 87A rebate and 4% cess.