Salary & HR
New vs old tax regime
6 min read
India runs two income tax structures side by side. The new regime taxes the same income through wider slabs at lower rates but removes almost every deduction. The old regime keeps narrower slabs at higher rates but still allows 80C, 80D, HRA exemption and home loan interest.
Neither regime is better for everyone — which one leaves you with more take-home pay depends entirely on how much you can actually deduct.
How the two regimes differ
| 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 | Not allowed | Allowed |
| Top rate | 30% above ₹24,00,000 | 30% above ₹10,00,000 |
Both regimes add 4% health and education cess on top of the tax after any rebate, and both apply a surcharge on very high incomes — above ₹50 lakh, ₹1 crore or ₹2 crore under the new regime, and above ₹5 crore under the old regime.
Worked example: ₹15,00,000 salary in both regimes
| New regime | Old regime | |
|---|---|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| Taxable income | ₹14,25,000 | ₹14,50,000 |
| Slab tax | ₹93,750 | ₹2,47,500 |
| Total tax (with 4% cess) | ≈ ₹97,500 | ≈ ₹2,57,400 |
Without any 80C, 80D or HRA claims, the old regime costs roughly ₹1,60,000 more on this income. Claiming a full 80C, HRA and home loan interest would close or reverse that gap — which is exactly why the slab rates alone don't tell you which regime wins.
Which regime is likely to suit you
As a rule of thumb, if your total deductions and exemptions come to less than about ₹4–4.5 lakh, the new regime tends to leave more in hand. Above that, the old regime often still wins once 80C (provident fund, insurance premiums), 80D (health insurance), HRA exemption and home loan interest are all added up.
New regime likely wins → deductions and exemptions below ≈ ₹4–4.5 lakh
Old regime likely wins → deductions and exemptions above ≈ ₹4–4.5 lakh
This is a starting point, not a substitute for running your own numbers — the exact crossover depends on your income level too. Enter your income under each regime in the income tax calculator to see the actual tax, not just the rule of thumb.
Common mistakes when comparing regimes
- Comparing the headline slab rates instead of the final tax after deductions and the 87A rebate — the new regime's lower rates don't automatically mean lower tax.
- Assuming the ₹12 lakh nil-tax threshold applies to gross salary. It applies to taxable income, after the ₹75,000 standard deduction is already subtracted.
- Forgetting the 4% cess, which is added on top of the tax in both regimes and quietly changes the comparison at the margin.
Once you've picked a regime, check what actually reaches your bank account each month with the take-home salary calculator or break down a CTC offer with the CTC calculator.