Old vs New Tax Regime
Compare your tax under the old and new regimes side-by-side and see which one saves you more (FY 2025-26).
Formula last reviewed 15 September 2026 · How we verify our calculators
New regime saves you
- Old regime tax
- ₹80,600
- New regime tax
- ₹0
| Description | Old Regime | New Regime |
|---|---|---|
| Gross salary (after allowances exempt under both regimes) | ||
| Deductions allowed only in old regime (excl. standard deduction) | ₹1,00,000 | ₹0 |
| Less: standard deduction | ₹50,000 | ₹75,000 |
| Income from salary | ₹10,50,000 | ₹11,25,000 |
| Income from self-occupied house property | ||
| Income other than salary | ||
| Gross total income | ₹10,50,000 | ₹11,25,000 |
| Less: eligible deductions | ₹2,25,000 | ₹0 |
| Taxable income | ₹8,25,000 | ₹11,25,000 |
| Income tax after relief u/s 87A | ₹77,500 | ₹0 |
| Surcharge | ₹0 | ₹0 |
| Health and education cess | ₹3,100 | ₹0 |
| Total tax liability | ₹80,600 | ₹0 |
Updates live as you type
Frequently asked questions
It comes down to how much you can genuinely deduct. As a rough guide the old regime starts to win once total exemptions and deductions exceed roughly 4,50,000 to 5,50,000, with the exact crossing point depending on your income level. Below about 12,00,000 of taxable income the new regime is very hard to beat, because the Section 87A rebate reduces the liability to zero and no amount of deductions can go below zero. Run both with your real figures rather than relying on a rule of thumb.
Almost every exemption and deduction: HRA under Section 10(13A), LTA, the entire Chapter VI-A set including 80C, 80D, 80E and 80G, and home loan interest on a self-occupied property under Section 24(b). What it gives back is wider and lower slabs, a larger standard deduction of 75,000 against the old regime's 50,000, and a rebate that runs up to 12,00,000 of taxable income rather than 5,00,000.
Section 80CCD(2) — the employer's contribution to NPS, deductible up to 14% of basic plus DA. It is the only significant deduction that survives in the new regime, which makes it disproportionately valuable to anyone who has moved across. Employees can often ask HR to restructure part of their package as an employer NPS contribution, converting taxable salary into a deductible one without changing total cost to company.
Because its bands are much steeper at middle incomes. The old regime's 20% rate starts at just 5,00,000, whereas the new regime charges only 10% at that level. So although the old regime removes more income from the tax net, it taxes what remains far harder. At a 12,00,000 salary the new regime's rebate takes the bill to zero, and to beat zero the old regime would need to push taxable income below 5,00,000 — requiring roughly 5,50,000 of deductions, which very few taxpayers reach.
Salaried taxpayers without business income can, and may even switch at filing time regardless of what they declared to their employer in April — the only consequence is a refund or a balance payable because TDS was computed on the other basis. If you have business or professional income the rules are stricter: you get one switch from old back to new, and once exercised the choice is final.
Two profiles stand out. A metro renter with a high HRA component, substantial rent and maxed 80C and 80D. And a homeowner paying significant interest on a home loan, where the Section 24(b) deduction of up to 2,00,000 sits on top of everything else. Both usually need income above roughly 15,00,000 for the arithmetic to work, because below that the new regime's rebate and lower rates are difficult to overcome.
Only if you genuinely reach them. Entering 1,50,000 under 80C when your actual contributions are 60,000, or rent you cannot produce receipts for, inflates the old regime's case and can flip the recommendation to a regime that will cost you more. The comparison is only as reliable as the inputs, and the deductions have to be real, paid in the year claimed, and documented well enough to survive a query.
Cess of 4% is applied in full to both regimes. Surcharge, which begins above 50,00,000 of total income, is applied in simplified form without the complete marginal-relief workings at each threshold band. For incomes comfortably below 50,00,000 this makes no difference at all. For very high incomes the figures here should be treated as indicative and checked against a full computation, particularly because the top surcharge rate itself differs between the two regimes.
It is worth more than people usually account for. The old regime requires collecting rent receipts, investment proofs, premium certificates and loan statements through the year, submitting them on time, and retaining them in case of a query. If your calculated saving from the old regime is a few thousand rupees, the administrative burden and the risk of a disallowed claim arguably outweigh it. If the saving runs into tens of thousands, it is clearly worth the effort.
The same salary, two answers, and a threshold that decides it
At a gross salary of ₹12,00,000 with a fairly typical deduction profile — ₹1,00,000 of HRA exemption, ₹1,50,000 under 80C, ₹25,000 under 80D and ₹50,000 of other deductions — the new regime charges ₹0 and the old regime charges ₹80,600. Every input is identical. The entire difference is which set of rules you elected.
That gap does not hold everywhere. Push the deductions high enough and the old regime wins; at ₹12 lakh with no deductions at all, the new regime wins by a wide margin. What decides it is a single quantity: how much you can genuinely deduct, measured against what the new regime's lower rates and larger standard deduction give you for free.
Since FY 2023-24 the new regime is the default. Doing nothing elects it. The old regime is now the opt-in choice, which is a reversal of how most people still think about the decision.
What each regime actually trades
The new regime gives you wider bands, lower rates, a ₹75,000 standard deduction and a Section 87A rebate that eliminates tax entirely up to ₹12,00,000 of taxable income. It takes away almost everything else: HRA, LTA, 80C, 80D, 80E, 80G, home loan interest on a self-occupied property, and the rest.
The old regime keeps every one of those but taxes through narrower, steeper bands — 20% starts at just ₹5,00,000 — with a ₹50,000 standard deduction and a rebate that runs out at ₹5,00,000 of taxable income.
One deduction survives in both: Section 80CCD(2), the employer's NPS contribution, deductible up to 14% of basic plus DA. For anyone on the new regime it is effectively the only remaining lever, and it is widely overlooked.
New regime slabs, FY 2025-26: nil to ₹4,00,000; 5% to ₹8,00,000; 10% to ₹12,00,000; 15% to ₹16,00,000; 20% to ₹20,00,000; 25% to ₹24,00,000; 30% above.
Old regime, under 60: nil to ₹2,50,000; 5% to ₹5,00,000; 20% to ₹10,00,000; 30% above.
How the comparison is computed
Both regimes run the same six-step chain, with different values plugged in:
Total income = Gross salary − salary exemptions − standard deduction + other income − Chapter VI-A deductions
Under the new regime, salary exemptions and Chapter VI-A deductions are both zero and the standard deduction is ₹75,000. Under the old, HRA comes off at the salary stage, the standard deduction is ₹50,000, and Chapter VI-A deductions come off total income.
Slab tax is then applied band by band, the 87A rebate subtracted, surcharge added above ₹50,00,000, and 4% cess applied to the result.
Both regimes, side by side, at ₹12 lakh
New regime. ₹12,00,000 − ₹75,000 = ₹11,25,000 taxable.
Nil on the first ₹4,00,000. ₹4,00,000 at 5% = ₹20,000. ₹3,25,000 at 10% = ₹32,500. Slab tax ₹52,500. Taxable income is under ₹12,00,000, so the 87A rebate of up to ₹60,000 covers all of it. Tax: ₹0.
Old regime. HRA exemption is the least of ₹2,00,000 received, ₹1,80,000 rent − ₹80,000 (10% of basic) = ₹1,00,000, and 50% of basic = ₹4,00,000 → ₹1,00,000.
₹12,00,000 − ₹1,00,000 − ₹50,000 = ₹10,50,000, less ₹2,25,000 of deductions = ₹8,25,000 taxable.
Nil on ₹2,50,000. ₹2,50,000 at 5% = ₹12,500. ₹3,25,000 at 20% = ₹65,000. Slab tax ₹77,500, plus 4% cess ₹3,100. Tax: ₹80,600.
Why the old regime loses despite ₹3.25 lakh of deductions. Its 20% band begins at ₹5,00,000, so the income it does tax is taxed hard. The new regime's rebate removes the liability completely at this level. To beat ₹0, the old regime would need deductions large enough to bring taxable income under ₹5,00,000 — roughly ₹5,50,000 of exemptions and deductions on a ₹12 lakh salary, which almost nobody reaches.
The break-even, and when the old regime still wins
The old regime becomes competitive at higher incomes with genuinely large deductions. Above ₹24,00,000, where both regimes charge 30% at the margin, the old regime's deductions reduce taxable income while the new regime's flat structure does not — so a taxpayer with a substantial home loan, maxed 80C, family health cover and significant HRA can come out ahead.
As a rough guide, the old regime tends to win when total exemptions and deductions exceed roughly ₹4,50,000 to ₹5,50,000, with the exact crossing depending on income. Below ₹12,00,000 of taxable income the new regime is close to unbeatable, because the rebate takes the liability to zero and no quantity of deductions can go below that.
The profile that most often favours the old regime: a metro renter with high HRA, or a homeowner paying substantial Section 24(b) interest, who also maxes 80C and 80D.
Reading the recommendation
The result names the regime with the lower liability for this year, together with the saving. Treat it as a decision for one financial year, not a permanent allegiance.
The comparison is only as honest as the deductions entered. The most common distortion is entering ceilings rather than actuals — the full ₹1,50,000 under 80C when you actually invest ₹60,000, or rent without receipts. Both inflate the old regime's case. Enter what you will genuinely pay and can document.
Note also what is excluded: surcharge above ₹50,00,000 is applied in simplified form, and capital gains at special rates sit outside the slab system and outside the 87A rebate entirely. A taxpayer with significant equity gains will not reach a nil liability however small the salary.
Where the choice goes wrong
Assuming it is locked for life. Salaried taxpayers with no business income may switch every year, including at filing regardless of what they told their employer in April. Those with business income get one switch back and are then locked.
Letting the default decide. Doing nothing elects the new regime. If the old one suits you, you must file Form 10-IEA.
Comparing rates instead of liabilities. The old regime's 20% band starting at ₹5,00,000 does far more damage than its headline rate suggests relative to the new regime's 10% at the same level.
Forgetting 80CCD(2) in the new regime. Employer NPS contributions up to 14% of basic remain deductible. Restructuring salary to include one is among the few remaining new-regime tax levers.
Choosing the old regime for deductions you intend to start making. The deduction has to be real and documented in the year you claim it.
Ignoring the effort. The old regime requires collecting and retaining proof all year. If your break-even saving is a few thousand rupees, the new regime's simplicity has value of its own.
How to actually make the switch
Electing the old regime is a two-stage act, and missing either stage is a common cause of an unexpected TDS deduction. First, tell your employer at the start of the financial year so payroll computes TDS on the old-regime basis; most companies collect this through a declaration in April. Second, if you have business or professional income, file Form 10-IEA before the return due date — salaried taxpayers without business income do not need it and may simply select the regime in the return itself.
If the two disagree, the return governs. Declaring the new regime to your employer and then filing under the old one is permitted and produces a refund; the reverse produces a balance payable, possibly with interest under Section 234B if the shortfall is large. Neither is an error, but both are avoidable by deciding once, in April, with your actual numbers rather than your intended ones.
Sources
- Income Tax Department, Government of India — old and new regime slab comparison, FY 2025-26