Old regime or new regime: how to decide before the deadline

The new regime has wider slabs, a higher standard deduction, and a rebate that wipes out tax below a higher income threshold. In exchange it disallows almost every deduction — no 80C, no 80D, no HRA exemption, no home-loan interest.

The old regime permits a broader set of deductions and exemptions subject to their conditions. The comparison depends on your income, eligibility and the financial year. In some cases both calculations can yield zero tax.

The break-even is where the estimated tax under the two regimes is equal. It changes with income, deductions, the applicable slabs, rebates and marginal relief. Avoid relying on a fixed rupee threshold.

Income level and the deductions you can legitimately claim both affect the comparison. Home-loan interest and HRA have their own conditions and limits; do not treat the amount you pay as automatically deductible.

Because the crossover moves with your own numbers, a rule of thumb is a starting point and nothing more. Run both computations side by side with your real figures — the calculator on this site shows both columns and the saving in rupees.

Both are avoidable with a single habit: keep the numbers, not the impression.

• Choosing early and claiming nothing. If you opt for the old regime and then fail to make the 80C investments before the financial year closes, you have taken the narrower slabs with none of the offsets. Salaried employees declare the regime to their employer at the start of the year, which is exactly when nobody has finished their tax planning.
• Switching without modelling the full year. The choice at work for TDS is not identical to the filing decision, and switching rules differ for taxpayers with and without business income. Model the whole year and check the current filing rules before making a decision.

Enter your annual gross, your 80C contributions to date, health insurance premiums, HRA and any home-loan interest into the calculator. Look at the difference in absolute rupees rather than the percentage, then decide whether closing the gap is worth the effort of making the investments.

If the results are close, consider eligibility, evidence, filing rules and professional advice rather than assuming either regime is automatically best.

The figures recorded here are for financial year 2025-26, assessment year 2026-27. Slabs, rebates and deduction limits change in almost every budget, so confirm the current rates on the income tax portal before you file or make a switch decision that cannot be reversed.

New regime, as recorded: nil up to 4 lakh, 5% from 4 to 8 lakh, 10% from 8 to 12 lakh, 15% from 12 to 16 lakh, 20% from 16 to 20 lakh, 25% from 20 to 24 lakh and 30% above. A salaried employee also gets a standard deduction of 75,000, and the section 87A rebate effectively makes taxable income up to 12 lakh free of tax, which is 12.75 lakh of gross salary once the standard deduction is taken into account.

Old regime, as recorded: nil up to 2.5 lakh, 5% from 2.5 to 5 lakh, 20% from 5 to 10 lakh and 30% above, with a 50,000 standard deduction, the same 87A rebate up to 5 lakh of income, and the full deduction set: 80C investments, 80D health insurance, HRA, home loan interest under 24(b), 80G donations and the additional NPS deduction under 80CCD(1B).

The structural difference is not the rates, it is that the new regime pays for its lower rates by withdrawing deductions. A deduction is worth your marginal rate, which at the top of the old regime is 30%, so the break-even is arithmetic rather than sentiment.

One deduction is worth remembering because it survives the change: the employer contribution to NPS under section 80CCD(2) is available in the new regime as well. Other deductions have their own rules and exceptions; confirm the current position with the Income Tax Department.

If your deductions amount to little more than the standard deduction and the 80C investments you were going to make regardless, the new regime usually wins, and it wins by a margin that widens as income rises. Compute both on the same numbers rather than reasoning about which one sounds better.

• People with substantial eligible deductions or exemptions should compare both calculations for their own circumstances.
• Employees claiming substantial HRA in a metro, where rent is high enough that the exempt portion is worth more than the difference in rates.
• Home owners with a large housing loan interest claim, especially on a self-occupied property where up to 2 lakh of interest is deductible only in the old regime.
• People with business or professional income should seek advice about the special switching rules and deductions; this salary-only calculator does not model them.
• Anyone whose NPS contributions under 80CCD(1B) are large enough to change the answer on their own.