The New Tax Regime is the default tax regime for individuals from FY 2023-24 onwards, offering lower slab rates without most deductions. The Old Tax Regime allows deductions under 80C, 80D, HRA, and other sections. Whether the Old or New Regime is better for you depends on how much you actually claim in deductions - typically, those with deductions above ₹3.75 lakh benefit more from the Old Regime.
Choosing the wrong tax regime can mean paying more tax than you need to. Here is a straightforward comparison to help you decide.
What is the difference between the Old and New Tax Regime?
| Feature | Old Tax Regime | New Tax Regime (Default) |
|---|---|---|
| Tax Slabs | Higher rates with deductions | Lower rates, no most deductions |
| Section 80C | Available (up to ₹1.5 lakh) | Not available |
| Section 80D (Medical) | Available | Not available |
| HRA Exemption | Available | Not available |
| Standard Deduction | ₹50,000 | ₹75,000 (from FY 2024-25) |
| Home Loan Interest (Self-Occupied) | Up to ₹2 lakh | Not available |
| Leave Travel Allowance (LTA) | Available | Not available |
| Who should choose | Those with high deductions | Those with few deductions |
What are the tax slabs under each regime?
New Tax Regime (FY 2025-26)
- Up to ₹3 lakh: Nil
- ₹3–7 lakh: 5%
- ₹7–10 lakh: 10%
- ₹10–12 lakh: 15%
- ₹12–15 lakh: 20%
- Above ₹15 lakh: 30%
Old Tax Regime
- Up to ₹2.5 lakh: Nil
- ₹2.5–5 lakh: 5%
- ₹5–10 lakh: 20%
- Above ₹10 lakh: 30%
Who should choose the Old Tax Regime?
The Old Regime is generally better if you can claim deductions totalling more than ₹3.75 lakh (approximate break-even point for those in the 30% slab). This typically includes:
- Home loan repayments (principal under 80C + interest deduction)
- PF contributions, PPF, ELSS, life insurance premiums
- Children's tuition fees
- Medical insurance premiums (80D)
- HRA exemption for rented accommodation
Who should choose the New Tax Regime?
The New Regime is generally better for:
- Individuals with few or no deductions
- Young earners early in their careers without home loans or large investments
- Those with income between ₹7–12 lakh, where the slab difference favours the new regime most
Can I switch between regimes?
Salaried individuals can switch between Old and New Regime every year when filing their ITR. However, those with business or professional income can switch to the Old Regime only once, and once they move back to the New Regime, they cannot switch again.
