Old vs. New Tax Regime: How to Choose

The core difference

India currently allows individual taxpayers to choose between two tax structures each year:

• Old regime: higher slab rates, but allows a wide set of deductions and exemptions - 80C (PPF, ELSS, life insurance premiums, etc.), 80D (health insurance), HRA, home loan interest, and more. Standard deduction for salaried employees: ₹50,000.
• New regime: lower slab rates, but strips out almost all of those deductions - the standard deduction is one of the few that remains, and is actually higher here at ₹75,000 (FY 2026-27). Combined with the rebate available at lower incomes, this means a salaried individual's income can be effectively tax-free up to around ₹12.75 lakh under the new regime, before any other deductions.

(Figures above checked against current sources as of September 2026 - FY 2026-27/AY 2027-28. Tax provisions change with each Union Budget; re-verify before relying on this for a filing decision.)

(A note on section numbers: the Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, renumbering almost every section - 80C is now Section 123, 87A is now Section 156. The deduction limits and rebate amounts themselves are unchanged, only the section labels moved. This article uses the familiar old numbers throughout, since that's still how most people search and talk about them, but be aware the "current" section number in official documents from FY 2026-27 onward is the new one.)

Why there's no universal right answer

The new regime was designed to be simpler, and often works out better for people who don't have significant deductions to claim - young earners without a home loan, or anyone who isn't maximising 80C/80D. The old regime often wins for people with a home loan (interest deduction), a large 80C investment habit, and health insurance premiums for themselves and their parents.

How to actually decide

1. List every deduction you'd realistically claim under the old regime this year - 80C investments, 80D premiums, home loan interest, HRA if applicable.
2. Calculate your tax liability under the old regime with those deductions applied.
3. Calculate your tax liability under the new regime (fewer deductions, but lower rates).
4. Compare the two numbers - not the regime names, the actual rupee amounts.

This app's own Tax Calculator runs both calculations side by side using your real numbers, which is the only reliable way to answer this - a rule of thumb ("new regime is simpler, so it's better") can genuinely cost you money if you have significant deductions to claim.

One thing worth knowing

You can typically switch between regimes each year if you're a salaried employee without business income (business-income taxpayers have more restrictive switching rules) - so this isn't a permanent, one-time decision unless your income structure locks you in.