Since FY 2023-24, India’s New Tax Regime is the default. You can still opt into the Old Regime if you want, but the tradeoff isn’t obvious without doing the math: the New Regime has lower slab rates and a bigger standard deduction, but no Section 80C, no 80D, no HRA, no home-loan interest deduction.
For most salaried Indians, the choice depends on a single number: how much in deductions you actually claim. This guide gives you the threshold, the worked examples, and the calculator to settle it.
The two regimes side by side
New Regime (default from FY 2023-24)
| Slab | Rate |
|---|---|
| Up to ₹3,00,000 | 0% |
| ₹3,00,001, ₹6,00,000 | 5% |
| ₹6,00,001, ₹9,00,000 | 10% |
| ₹9,00,001, ₹12,00,000 | 15% |
| ₹12,00,001, ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Plus:
- Standard deduction: ₹75,000 (for salaried, FY 2024-25 onwards)
- Section 87A rebate: ₹60,000 rebate if total income ≤ ₹12,00,000
- 4% Health & Education Cess on tax + surcharge
- Surcharge: 10% above ₹50L, 15% above ₹1Cr, 25% above ₹2Cr (capped at 25% for new regime)
Old Regime (opt-in only)
| Slab | Rate |
|---|---|
| Up to ₹2,50,000 | 0% |
| ₹2,50,001, ₹5,00,000 | 5% |
| ₹5,00,001, ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Plus:
- Standard deduction: ₹50,000 (for salaried)
- Section 87A rebate: ₹12,500 if total income ≤ ₹5,00,000
- Section 80C: ₹1,50,000 (PPF, EPF, ELSS, LIC, etc.)
- Section 80D: ₹25,000 (₹50K for senior parents) for health insurance
- HRA exemption (Section 10(13A))
- Home loan interest (Section 24(b)): up to ₹2,00,000 for self-occupied
- Other smaller deductions (80CCD(1B) NPS ₹50K, 80E education loan, etc.)
The Old Regime has higher slab rates but rewards taxpayers who can stack large deductions.
The break-even formula
Old Regime wins when: (your deductions) > (slab difference saving in New Regime) + (extra standard deduction in New Regime)
Roughly, your total deductions in Old Regime need to exceed about ₹3,75,000 to ₹4,25,000 for Old Regime to win at most income levels.
That break-even is most easily reached if you have:
- ₹1,50,000 Section 80C (max EPF + PPF + ELSS)
- ₹2,00,000 Section 24(b) home-loan interest
- ₹50,000 NPS 80CCD(1B)
- ₹25,000 to ₹75,000 80D health insurance
- HRA exemption (varies by salary structure and rent)
If you’re a renter without home loan, or a young employee with limited 80C deductions, New Regime almost certainly wins.
Worked examples
Example 1: ₹10 lakh salary, minimal deductions, single, renter
| Old Regime | New Regime | |
|---|---|---|
| Gross | ₹10,00,000 | ₹10,00,000 |
| Standard deduction | ₹50,000 | ₹75,000 |
| 80C | ₹0 | (not allowed) |
| 80D | ₹0 | (not allowed) |
| HRA | ₹0 (not claimed) | (not allowed) |
| Taxable | ₹9,50,000 | ₹9,25,000 |
| Tax | ₹1,02,500 | ₹49,500 |
| + 4% cess | ₹4,100 | ₹1,980 |
| Total tax | ₹1,06,600 | ₹51,480 |
New Regime saves ₹55,120. Clear win.
Example 2: ₹15 lakh salary, max deductions (homeowner, family insurance, NPS), HRA = ₹1.2L
| Old Regime | New Regime | |
|---|---|---|
| Gross | ₹15,00,000 | ₹15,00,000 |
| Standard deduction | ₹50,000 | ₹75,000 |
| Section 80C | ₹1,50,000 | 0 |
| Section 80D | ₹50,000 (parents 60+) | 0 |
| 80CCD(1B) NPS | ₹50,000 | 0 |
| HRA exemption | ₹1,20,000 | 0 |
| Section 24(b) home loan | ₹2,00,000 | 0 |
| Total deductions | ₹6,20,000 | ₹75,000 |
| Taxable | ₹8,80,000 | ₹14,25,000 |
| Tax | ₹88,500 | ₹1,42,500 |
| + 4% cess | ₹3,540 | ₹5,700 |
| Total tax | ₹92,040 | ₹1,48,200 |
Old Regime saves ₹56,160. Clear win.
Example 3: ₹25 lakh salary, all deductions stacked, owner-occupier
At ₹25 lakh, the bracket arithmetic flips again because:
- Old Regime hits the 30% slab at ₹10L+
- New Regime hits 30% only at ₹15L+
- New Regime extra brackets at 5/10/15/20% capture ₹3L-₹15L at gentler rates
Even with ₹6+ lakh of stacked deductions, the Old Regime advantage shrinks at the top. At very high incomes, New Regime can still win despite no deductions.
Our Old vs New Regime Calculator does this comparison for any specific input.
The deductions that matter most
If you’re going to opt for Old Regime, build up these deductions:
Section 80C: ₹1,50,000 limit (most common)
Eligible items (any combination):
- EPF contributions (your portion only)
- PPF: up to ₹1.5L/year
- ELSS mutual funds (Equity-Linked Savings Schemes): 3-year lock-in
- Life insurance premiums (LIC, etc.)
- 5-year tax-saving bank FD
- Tuition fees for up to 2 children
- Home loan principal repayment
- Sukanya Samriddhi Yojana (for daughters)
Section 80D: ₹25,000-₹1,00,000+
- Health insurance for self/family: ₹25,000 (₹50,000 if 60+)
- Health insurance for parents: additional ₹25,000 (₹50,000 if parents 60+)
- Preventive health check-up: ₹5,000 within above limit
Section 80CCD(1B): ₹50,000 NPS
Extra deduction on top of 80C, specifically for additional NPS Tier 1 contributions.
Section 24(b): up to ₹2,00,000 home loan interest
Self-occupied property only. Let-out property has no upper cap on interest deduction.
HRA (Section 10(13A))
Minimum of:
- Actual HRA received
- Rent paid minus 10% of basic salary
- 50% of basic salary (metro: Mumbai/Delhi/Kolkata/Chennai) or 40% (non-metro)
Our HRA Exemption Calculator computes the right number.
Other smaller deductions
- 80E: education loan interest (no upper cap, 8-year max)
- 80EE/EEA: additional home loan interest for first-time buyers
- 80G: charitable donations (varies by recipient)
- 80U: disability deduction (₹75,000 to ₹1,25,000)
- 80TTA: ₹10,000 of savings account interest
When to choose New Regime
Default to New Regime if:
- You’re a renter without home loan
- Limited 80C investments (just EPF, no PPF/ELSS)
- No 80CCD(1B) NPS contributions
- No 80D health insurance beyond mandatory employer scheme
- Income above ₹15L with minimal deductions
- You want simplicity and no documentation
For most young salaried professionals (first 5-10 years of career), the New Regime is the right default.
When to choose Old Regime
Switch to Old Regime if:
- Homeowner with active home loan (Section 24(b) ₹2L+)
- Maxing 80C (₹1.5L deduction)
- 80CCD(1B) NPS contributor (₹50K)
- Family of 4+ with health insurance (₹75K+ on 80D)
- HRA-eligible salary structure with significant rent
The combined deductions for someone in this profile easily clear the ₹4 lakh break-even threshold.
Switching between regimes
Salaried employees can switch regime year-by-year via the income tax return (ITR).
Self-employed (business or professional income) can switch from old to new once, but if they switch back from new to old, they cannot return to new again (verify against current rules, this has changed).
You also indicate your choice to your employer for TDS purposes via Form 10IEA at the start of the financial year, but you can still change at filing time.
Common mistakes
Defaulting to whichever regime the employer used last year. Run the math every April.
Forgetting to claim HRA properly. Submit rent receipts and PAN of landlord (if rent > ₹1L/year) to your employer to get HRA exemption baked into TDS.
Claiming both 80C and 80CCD(1) on the same NPS contribution. Choose one; the same contribution can’t be double-counted.
Investing in tax-saving FDs because of habit. ELSS funds inside 80C have better long-term returns and a shorter 3-year lock-in.
Letting EPF interest income above ₹2.5L go untracked. Above-cap voluntary EPF (VPF) interest is now taxable.
Ignoring the LTCG cap of ₹1.25L on equity. Long-term equity gains above this are taxed at 12.5%. Tax-loss harvesting and selling at the cap each year is a real strategy.
Other countries
The “old vs new regime” choice is uniquely Indian. Other countries have unified frameworks:
- United States: standard vs itemized deduction choice, no “regime” toggle.
- United Kingdom: no choice, deductions are limited to specific schemes (Gift Aid, Pension relief).
- Canada: most deductions are above-the-line, no toggle.
- Australia: work-related deductions only, no toggle.
Primary sources
- Income Tax Department India, New Regime
- CBDT Notifications, latest amendments
- Section 87A rebate provisions, as amended
- EPFO contribution rates, 12% employee + employer