Old vs. new tax regime: how to actually choose

Every salaried taxpayer in India now picks between two tax regimes each year: the new regime (lower slab rates, almost no deductions) and the old regime(higher slab rates, but dozens of deductions and exemptions). Comparing the two by slab rate alone is misleading — the real question is whether your deductions are large enough to close the gap the new regime’s structure already gives everyone else.

Why the new regime is now the default

The single biggest difference isn’t the slab rates — it’s the tax rebate threshold. Under the new regime, taxable income up to ₹12,00,000 owes zero tax. Under the old regime, that threshold is just ₹5,00,000. That gap is large enough that most salaried taxpayers without significant old-regime-only deductions come out ahead on the new regime by default, even though its slab rates look higher further up the scale.

When the old regime still wins

The old regime wins when your deductions are large enough, relative to your income, to shrink your taxable income by more than the new regime’s rate structure already saves you. That’s rare below roughly ₹15–20 lakh of income, but becomes realistic once several of these stack together:

• A large home loan — Section 24(b) lets you deduct up to ₹2,00,000 of home loan interest, old regime only
• Section 80C maxed out — ₹1,50,000 across PPF, ELSS, life insurance premiums, and similar
• Health insurance and NPS — Section 80D and 80CCD(1B) add further old-regime-only room
• High HRA relative to rent — HRA exemption is old regime only, and matters most for employees paying steep metro rent

How to actually decide

There’s no slab-rate table that answers this for you — it genuinely depends on your specific income and deductions, and the two regimes’ rules interact in ways that aren’t obvious from a quick mental estimate. The reliable way to decide is to run your actual numbers through both regimes side by side, which is exactly what the Income Tax Calculator above does. If you’re checking this as part of understanding your payslip rather than filing a return, the CTC to In-hand and Take-home Pay calculators let you see how the regime choice flows through to your actual monthly number.