Your CTC is ₹12 lakh. After standard deduction, your taxable income is ₹11.25 lakh. Old regime: ₹1,53,600 tax. New regime: ₹87,500 tax. But add 80C + 80D + HRA + home loan deductions, and old regime drops to ₹68,400 — cheaper than new. The right answer depends on your deductions. Here's the math.
New Tax Regime (Default from FY 2024-25)
📊 New Regime Slabs (FY 2025-26)
| Income Slab | Tax Rate | On ₹10L Taxable | |------------|---------|----------------| | ₹0-4,00,000 | 0% | ₹0 | | ₹4,00,001-8,00,000 | 5% | ₹20,000 | | ₹8,00,001-12,00,000 | 10% | ₹20,000 | | ₹12,00,001-16,00,000 | 15% | — | | ₹16,00,001-20,00,000 | 20% | — | | ₹20,00,001-24,00,000 | 25% | — | | Above ₹24,00,000 | 30% | — | | Total | | ₹40,000 |
Standard deduction: ₹75,000 (new regime)
Old Tax Regime
📊 Old Regime Slabs
| Income Slab | Tax Rate | On ₹10L Taxable | |------------|---------|----------------| | ₹0-2,50,000 | 0% | ₹0 | | ₹2,50,001-5,00,000 | 5% | ₹12,500 | | ₹5,00,001-10,00,000 | 20% | ₹1,00,000 | | Above ₹10,00,000 | 30% | — | | Total | | ₹1,12,500 |
Standard deduction: ₹50,000 (old regime)
The Trench Truth: The new regime has lower rates but zero deductions. The old regime has higher rates but lets you claim 80C (₹1.5L), 80D (₹25K-75K health insurance), HRA, home loan interest (₹2L), and more. If your total deductions exceed roughly ₹3.75 lakh, the old regime is cheaper. If they're below that, the new regime wins. Most salaried people with a home loan + 80C + 80D + HRA should stick to the old regime. Most people without these deductions should switch to new.
📊 Diagram: Which Regime Wins?
┌──────────────────────────────────────────────────────────────┐
│ OLD vs NEW REGIME: THE DECISION TREE │
├──────────────────────────────────────────────────────────────┤
│ │
│ Do you have ANY of these? │
│ ┌─────────────────────────────────────────────┐ │
│ │ 80C (PPF, ELSS, home loan principal) ₹1.5L │ │
│ │ 80D (health insurance) ₹25K-75K │ │
│ │ HRA exemption │ │
│ │ Home loan interest (24b) ₹2L │ │
│ │ NPS contribution ₹50K │ │
│ └─────────────────────────────────────────────┘ │
│ │
│ Total deductions > ₹3.75L? │
│ ┌──────────┐ │
│ │ YES │ → OLD REGIME saves more │
│ └──────────┘ │
│ │
│ Total deductions < ₹3.75L? │
│ ┌──────────┐ │
│ │ YES │ → NEW REGIME saves more │
│ └──────────┘ │
│ │
│ No deductions at all? │
│ ┌──────────┐ │
│ │ YES │ → NEW REGIME (default — do nothing) │
│ └──────────┘ │
│ │
└──────────────────────────────────────────────────────────────┘
Tax Comparison by Salary
📊 Without Any Deductions
| Gross Salary | Old Regime Tax | New Regime Tax | Difference | |-------------|---------------|---------------|-----------| | ₹5,00,000 | ₹12,500 | ₹0* | New saves ₹12,500 | | ₹7,50,000 | ₹62,500 | ₹20,000 | New saves ₹42,500 | | ₹10,00,000 | ₹1,12,500 | ₹40,000 | New saves ₹72,500 | | ₹12,00,000 | ₹1,72,500 | ₹70,000 | New saves ₹1,02,500 | | ₹15,00,000 | ₹2,62,500 | ₹1,30,000 | New saves ₹1,32,500 | | ₹20,00,000 | ₹4,12,500 | ₹2,70,000 | New saves ₹1,42,500 |
*₹5L income: under basic exemption in both regimes with rebate u/s 87A
📊 With Typical Deductions (80C ₹1.5L + 80D ₹25K + HRA ₹1L + Home Loan Interest ₹2L = ₹4.75L)
| Gross Salary | Old Regime Tax | New Regime Tax | Difference | |-------------|---------------|---------------|-----------| | ₹7,50,000 | ₹0 | ₹20,000 | Old saves ₹20,000 | | ₹10,00,000 | ₹32,500 | ₹40,000 | Old saves ₹7,500 | | ₹12,00,000 | ₹80,000 | ₹70,000 | New saves ₹10,000 | | ₹15,00,000 | ₹1,20,000 | ₹1,30,000 | Old saves ₹10,000 | | ₹20,00,000 | ₹2,70,000 | ₹2,70,000 | Same! |
Key Takeaways
- New regime is default — you must actively choose old regime when filing ITR
- Deductions > ₹3.75L → old regime wins — below that, new regime saves more
- Home loan + 80C + 80D + HRA usually pushes you past the ₹3.75L threshold
- ₹5L salary = zero tax in both regimes (Section 87A rebate)
- Choose regime by April — you can't switch after filing
- Calculate your tax: Loan EMI Calculator | Compound Interest Calculator | Tip Calculator
Related articles: HRA Exemption Guide | Home Loan Tax Benefits | PPF vs FD vs Mutual Fund
Frequently Asked Questions
Can I switch tax regimes every year? Salaried employees can switch between old and new regime every year when filing ITR. Business/professional income holders get only one chance to switch — after that, they're locked in.
Is the ₹75,000 standard deduction in new regime automatic? Yes. You don't need to submit any proof or investment declarations. It's automatically deducted from your salary income under the new regime.
What deductions are NOT available in new regime? HRA exemption, Section 80C (PPF, ELSS, life insurance), Section 80D (health insurance), home loan interest under Section 24(b), LTA — all gone in the new regime.
Is the new regime better for salaried employees? It depends. If your total deductions (80C + 80D + HRA + home loan interest) exceed ₹3.75 lakh, the old regime saves more tax. Below that threshold, the new regime wins.
What is Section 87A rebate? If your total income is ₹5 lakh or below (old regime) or ₹7 lakh or below (new regime), you get a rebate that makes your tax liability zero. This is why many low-income earners pay no tax.
Sources: Income Tax Act 1961 (as amended), Finance Act 2024, CBDT Tax Calculator, Union Budget 2024-25.
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