Old vs New Tax Regime — Which Should You Choose?

Last updated: August 2026

Since FY 2020-21 India has had two income-tax systems, and from FY 2023-24 the new regime is the default. Picking the right one can save you thousands of rupees. Here's how to decide.

The quick answer

If you claim large deductions — a fully used 80C, home-loan interest, HRA and 80D — the old regime can win. If your deductions are small, the new regime usually wins, because its rates are lower and income up to ₹12 lakh is effectively tax-free through the Section 87A rebate.

New regime (FY 2025-26)

• Lower slabs: nil up to ₹4L, then 5%, 10%, 15%, 20%, 25% and 30%.
• Standard deduction of ₹75,000 for salaried people.
• The 87A rebate makes income up to ₹12,00,000 tax-free (about ₹12.75L for salaried, after the standard deduction).
• Almost no other deductions are allowed.

Old regime

• Higher rates — 30% starts at just ₹10 lakh.
• Keeps popular deductions: 80C (₹1.5L), 80D, HRA, home-loan interest and more.
• ₹50,000 standard deduction; income up to ₹5,00,000 is tax-free via rebate.

A simple way to choose

Add up the deductions you'll actually claim. If they're large enough to pull your taxable income well below what the new regime taxes, the old regime wins; otherwise the new regime does. Rather than guess, it's easiest to compute both side by side.