Money Basics · Taxes & 80C

Old vs new tax regime

India has two income tax regimes. You choose one each year. The right choice depends on your deductions.

Old regime

Higher base tax rates, but you can claim dozens of deductions to reduce taxable income: 80C (₹1.5L), 80D (health insurance), HRA, home loan interest, standard deduction, and more.

Good for: anyone with significant deductions. Particularly people maximising 80C, paying home loan EMIs, or claiming HRA.

New regime (the default)

Lower base tax rates. No deductions except standard deduction (₹75,000 from FY2025). Simpler. But if you had large deductions under old regime, you may pay more under new regime.

New regime is now the DEFAULTYou must actively opt for old regime if you want it

Which to choose?

The simple test: calculate your tax under both and pick the lower one.

Below about ₹12.75 lakh of salary the new regime takes the bill to zero on its own, the ₹75,000 standard deduction plus the 87A rebate, so deductions buy you nothing there.

Above that, the old regime only catches up once deductions get large. Against the current slabs the break-even sits near ₹5.4 lakh of deductions (on top of the standard deduction) at ₹15 lakh of salary, and near ₹8 lakh at ₹25 lakh.

> Those break-evens move every time either slab table moves. Run your own numbers on the calculator at incometax.gov.in rather than carrying a remembered threshold.

What's consistent across both

• Standard deduction: ₹75,000 (new) or ₹50,000 (old)
• Basic exemption: ₹4L (new regime) or ₹2.5L (old regime)
• Rebate u/s 87A: zero tax on taxable income up to ₹12L in new regime, ₹5L in old

File your ITR before declaring a regime to your employer. Once you've indicated a choice to the employer for TDS purposes, you can change it at filing time.

Takeaway. Old regime gives deductions but higher rates; new regime gives lower rates but no deductions. Calculate both. The regime with lower final tax liability wins.