India Old vs New Tax Regime Comparison

Summary

India offers two income tax systems: the new regime (lower rates, fewer deductions) and the old regime (higher rates, many deductions). The right choice depends on your deduction profile. If your total deductions under the old regime exceed approximately Rs 3.75-4.25 lakh (varies by income level), the old regime typically saves more tax. The calculator runs both calculations side by side.

How it works

The trade-off

The new regime has more slabs and lower rates but only allows the standard deduction (Rs 75,000) and employer NPS contribution (Section 80CCD(2)). The old regime has higher rates but allows deductions for:

• Section 80C: Rs 1.5 lakh (PPF, ELSS, EPF, insurance, tuition fees)
• Section 80D: Health insurance premiums (Rs 25,000-75,000)
• HRA exemption: varies by salary and rent
• Section 24: Home loan interest (up to Rs 2 lakh)
• Section 80CCD(1B): NPS (additional Rs 50,000)
• Standard deduction: Rs 50,000

Break-even analysis

The calculator determines the break-even deduction amount — the level of old-regime deductions at which both regimes produce the same tax. Below that amount, the new regime wins. Above it, the old regime wins.

For a salary of Rs 15 lakh, the break-even point is roughly Rs 3.75-4 lakh in deductions. If your HRA + 80C + 80D + other deductions exceed this, the old regime is better.

Who should choose which

New regime favoured: Young earners with low rent, no home loan, and limited investments. Income up to Rs 12.75 lakh (salaried) is effectively tax-free under the new regime.

Old regime favoured: Earners paying high rent in metros, with home loans, maxing out 80C and 80D, and making NPS contributions.

Worked example

Salary: Rs 18,00,000, HRA: Rs 4,00,000, Rent: Rs 25,000/month, 80C: Rs 1,50,000, 80D: Rs 25,000

New regime:

1. Taxable: Rs 18,00,000 - Rs 75,000 = Rs 17,25,000
2. Tax: Rs 0 + Rs 20,000 + Rs 40,000 + Rs 60,000 + Rs 25,000 = Rs 1,45,000 (approx)
3. Cess: Rs 5,800
4. Total: Rs 1,50,800

Old regime:

1. HRA exemption: min(Rs 4,00,000, 50% of basic, rent - 10% basic) = approximately Rs 2,40,000
2. Deductions: Rs 1,50,000 (80C) + Rs 25,000 (80D) + Rs 50,000 (standard) + Rs 2,40,000 (HRA) = Rs 4,65,000
3. Taxable: Rs 18,00,000 - Rs 4,65,000 = Rs 13,35,000
4. Tax: Rs 0 + Rs 12,500 + Rs 67,000 + Rs 1,00,500 = Rs 1,80,000 (approx)
5. Cess: Rs 7,200
6. Total: Rs 1,87,200

In this case, the new regime saves Rs 36,400 despite substantial old-regime deductions.

Inputs explained

• Gross salary and salary breakup — basic, HRA, special allowances
• All old-regime deductions — 80C, 80D, HRA, home loan, NPS, etc.
• Tax year — determines slab rates for both regimes

Outputs explained

• Tax under each regime — side-by-side comparison
• Better regime — which one gives lower total tax
• Savings — the difference in tax between the two regimes
• Break-even deduction — the minimum deductions needed for the old regime to win

Assumptions & limitations

• Salaried employees can switch regimes each year. Self-employed individuals have more limited switching options.
• The calculator does not model surcharge tiers or specific state-level variations.
• Employer NPS contribution (80CCD(2), up to 14% of basic) is available in both regimes.
• The new regime’s Rs 12 lakh rebate (Section 87A) applies only when total income is at or below Rs 12 lakh — exceeding it by even Rs 1 loses the entire rebate.