Since Budget 2025, the new tax regime has become the default and the cheaper choice for most salaried people. But if you claim large deductions — home loan interest, HRA, 80C and 80D — the old regime can still save you money. This guide shows exactly where the line is.
The new regime at a glance (FY 2025-26)
- Slabs: 0% up to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh, 30% above.
- Standard deduction: ₹75,000 for salaried people and pensioners.
- Rebate under section 87A: no tax if taxable income is up to ₹12 lakh — so a salary of up to ₹12.75 lakh is effectively tax-free.
- Most deductions (80C, 80D, HRA, home loan interest on a self-occupied house) are not allowed.
The old regime at a glance
- Slabs: 0% up to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh, 30% above.
- Standard deduction: ₹50,000. Rebate makes income up to ₹5 lakh tax-free.
- All the familiar deductions are available: 80C (₹1.5 lakh), 80D (health insurance), HRA, home loan interest (up to ₹2 lakh), NPS 80CCD(1B) and more.
Tax under both regimes — real numbers
The table shows total tax including 4% cess. “Typical deductions” means ₹1.5 lakh under 80C plus ₹25,000 under 80D. The last column shows how much in total deductions you would need before the old regime becomes cheaper.
| Salary | New regime | Old: typical deductions (₹1.75L) | Old: + ₹2L home loan interest | Old regime wins above |
|---|---|---|---|---|
| ₹7,00,000 | ₹0 | ₹0 | ₹0 | ₹1,50,000 |
| ₹10,00,000 | ₹0 | ₹70,200 | ₹28,600 | ₹4,50,000 |
| ₹12,75,000 | ₹0 | ₹1,32,600 | ₹85,800 | ₹7,25,000 |
| ₹15,00,000 | ₹97,500 | ₹2,02,800 | ₹1,40,400 | ₹5,43,750 |
| ₹20,00,000 | ₹1,92,400 | ₹3,58,800 | ₹2,96,400 | ₹7,08,333 |
| ₹25,00,000 | ₹3,19,800 | ₹5,14,800 | ₹4,52,400 | ₹8,00,000 |
| ₹30,00,000 | ₹4,75,800 | ₹6,70,800 | ₹6,08,400 | ₹8,00,000 |
What the numbers tell us
- Up to ₹12.75 lakh salary: the new regime is unbeatable — your tax is zero.
- ₹15–20 lakh: the new regime wins unless you have a home loan and claim HRA or other large deductions.
- ₹25 lakh and above: you need roughly ₹7–8 lakh of deductions for the old regime to come out ahead, which few people have.
How to decide in 2 minutes
- Add up every deduction you can genuinely claim: 80C, 80D, HRA exemption, home loan interest, NPS and others.
- Find your salary on the income tax by salary page — each one shows the exact break-even deduction.
- Or enter your own numbers in the income tax calculator, which compares both regimes side by side.
Salaried employees can switch regimes every year when filing their return, so re-check each year as your salary and deductions change.