Old vs new tax regime: which one actually costs you less
Every year the same advice circulates: the new regime is simpler, the old regime is better if you have investments. Both halves are true and neither tells you what to pick. The decision reduces to a single number — the amount of deductions you will actually claim, not the amount you intend to.
What each regime gives you
The new regime has lower rates, a wider rebate and a ₹75,000 standard deduction, but almost no other deductions. The old regime taxes at higher rates and allows a long list of them.
| New regime | Old regime | |
|---|---|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| Section 80C | — | ₹1,50,000 |
| Section 80D | — | ₹25,000–₹1,00,000 |
| Section 80CCD(1B), NPS | — | ₹50,000 |
| HRA exemption | — | Yes |
| Home-loan interest, 24(b) | — | ₹2,00,000 |
| Employer NPS, 80CCD(2) | 14% of basic | 10% of basic |
| 87A rebate up to | ₹12,00,000 taxable | ₹5,00,000 taxable |
The rates differ too. The new regime starts taxing at ₹4,00,000 and climbs in seven bands to 30% above ₹24,00,000. The old regime starts at ₹2,50,000 and reaches 30% at just ₹10,00,000 — which is why it needs the deductions to compete at all.
The break-even, at real income levels
The honest way to answer this is to compute both. On a salary with no other income, FY 2025-26, the old regime starts winning once total deductions exceed roughly:
| Annual salary | Break-even deductions |
|---|---|
| ₹10,00,000 | about ₹4,50,000 |
| ₹15,00,000 | about ₹5,45,000 |
| ₹25,00,000 | about ₹8,00,000 |
Below those figures the new regime costs less. Above them the old one does.
Those are large numbers. ₹5,45,000 of deductions on a ₹15,00,000 salary means a maxed-out 80C, a full ₹50,000 in NPS, family and parental health insurance, and a substantial HRA or home-loan interest claim — all of them real, all of them documented.
A worked comparison
Take a ₹15,00,000 salary with a genuinely good deduction profile: ₹1,50,000 in 80C, ₹25,000 in 80D, and an HRA claim on ₹25,000 a month of rent against a ₹6,00,000 basic.
New regime ₹97,500
Old regime ₹1,27,171
New regime wins ₹29,671 a year
Even with a serious set of deductions, the new regime is still ahead — because the claimed total lands under the ₹5,45,000 break-even. With no deductions at all, the gap widens to ₹1,59,900.
That result surprises people, and it is the single most common reason the wrong regime gets chosen.
When the old regime genuinely wins
- A home loan in its early years. Interest is front-loaded, so a ₹2,00,000 section 24(b) claim is realistic for most of the first decade.
- High rent in a metro. An HRA exemption on ₹40,000–₹50,000 a month of rent is a large deduction on its own.
- Both together. A home loan on one property plus rent paid in another city can be claimed simultaneously if the circumstances are genuine, and that combination is where the old regime is decisively better.
Questions worth answering honestly
Do you actually invest the 80C amount? Not "will you before March" — do you, every year? An intended ELSS investment is worth nothing at assessment.
Do you have rent receipts? An HRA claim needs them, and above ₹1,00,000 of annual rent it needs the landlord's PAN as well. No PAN, no claim.
Will your circumstances hold? A home loan ending, a move to a company-provided flat, or an 80C investment maturing all move the break-even.
How to switch
A salaried person can choose the regime each year when filing, regardless of what they declared to their employer — the declaration only affects how much TDS is deducted through the year, not what you finally pay. Business and professional income is different: opting out of the new regime there is a one-way door in most cases, and switching back has conditions.
Check it against your own numbers
The Income Tax Calculator runs both regimes over the same figures and tells you which costs less and by how much. Enter the deductions you genuinely claim rather than the ones you could — that is the input the whole decision turns on. For a focused side-by-side, the Old vs New Tax Regime Calculator also shows the break-even deduction level for your income.