New vs Old Tax Regime: Which Is Better?
India gives individual taxpayers a choice: the new tax regime, with wider slabs and lower rates but almost no deductions, or the old tax regime, with higher rates but the familiar 80C, 80D and HRA deductions still in play.
Neither one is better for everyone. Which regime leaves you with more take-home pay depends entirely on how much you can genuinely deduct, not on which set of rates looks lower on paper.
New vs old regime, at a glance
| Item | New regime | Old regime |
|---|---|---|
| Nil slab up to | ₹4,00,000 | ₹2,50,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| 87A rebate up to | ₹60,000 (income ≤ ₹12,00,000) | ₹12,500 (income ≤ ₹5,00,000) |
| 80C, 80D, HRA exemption | Not allowed | Allowed |
| Top rate | 30% above ₹24,00,000 | 30% above ₹10,00,000 |
| Surcharge threshold | ₹50 lakh / ₹1 crore / ₹2 crore | ₹5 crore (37% top rate) |
New regime slabs in full
| Taxable income | 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% |
Old regime slabs in full
| Taxable income | 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 is the only one where 80C (up to ₹1.5 lakh), 80D health insurance premiums, HRA exemption and home loan interest under section 24(b) can reduce your taxable income before these slabs apply.
Worked example: ₹10,00,000 salary, both regimes
Take a salaried employee earning ₹10,00,000 a year with no other deductions claimed beyond the standard deduction.
| New regime | Old regime | |
|---|---|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| Taxable income | ₹9,25,000 | ₹9,50,000 |
| Slab tax | ₹32,500 | ₹1,02,500 |
| Section 87A rebate | − ₹32,500 (fully cancelled) | Not applicable |
| Tax after rebate | ₹0 | ₹1,02,500 |
| 4% cess | ₹0 | ₹4,100 |
| Total tax | ₹0 | ≈ ₹1,06,600 |
Without any other deductions, the new regime saves this taxpayer the full ≈₹1,06,600, because their taxable income under the new regime falls under the ₹12,00,000 rebate ceiling and gets wiped out entirely. The old regime only starts to close that gap once real 80C, 80D and HRA claims come into the picture.
How to actually decide
Work through these in order rather than guessing from the slab rates:
- Add up everything you can genuinely claim under the old regime: 80C investments, 80D health insurance, HRA exemption if you pay rent, and home loan interest if applicable.
- If that total is small or zero, stop here: the new regime will almost certainly leave you with more take-home pay.
- If it's substantial (roughly ₹4–4.5 lakh or more, though this shifts with your income level), run your actual number under both regimes rather than relying on a rule of thumb.
- Compare the two total tax figures, not the headline rates: the new regime's lower rates on paper don't always beat the old regime once real deductions are subtracted first.
Rough rule of thumb: deductions below ≈ ₹4–4.5 lakh → new regime tends to win
Deductions above ≈ ₹4–4.5 lakh → old regime is worth comparing closely
Compare both regimes on your own income
A rule of thumb only gets you so far: the exact crossover point shifts with your income level and exactly how much you deduct. Enter your real numbers and see both totals side by side.
Common mistakes when comparing regimes
- Comparing slab rates instead of final tax. The new regime's lower rates don't automatically mean lower tax once rebates and deductions are applied.
- Assuming ₹12 lakh nil-tax applies to gross salary. It applies to taxable income, after the standard deduction is already subtracted.
- Forgetting the 4% cess. It's added on top of tax in both regimes and can shift a close comparison at the margin.
- Ignoring surcharge at high incomes. Above ₹50 lakh, the surcharge changes the effective rate meaningfully in both regimes.
Once you've picked a regime, see what actually lands in your bank account each month with the salary calculator or break down a full CTC offer with the CTC calculator.