Old vs New Tax Regime Comparison — Choose Wisely for FY 2025-26
Compare old and new income tax regimes side by side. Calculate exact tax under both regimes with all deductions to find which saves you more money in 2026.
The Indian government offers two tax regimes and choosing the wrong one can cost you lakhs per year. The new regime has lower slab rates starting from 5% for income above Rs 3 lakh with a standard deduction of Rs 75000 but no other deductions. The old regime has higher rates but allows deductions under 80C 80D 80E HRA LTA NPS and home loan interest. The breakeven point is approximately Rs 3.75 lakh in total deductions — if your deductions exceed this the old regime saves more.
At what salary does old regime become better?
If your total deductions exceed Rs 3.75 lakh the old regime saves more. This is achievable with 80C (Rs 1.5L) + 80D (Rs 50K) + HRA (Rs 1.5L+) + NPS 80CCD1B (Rs 50K). For salaries above Rs 15 lakh with home loan the old regime almost always wins.
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Old vs New Tax Regime Comparison
How Tax Calculation Works
Income tax is calculated on your total taxable income after deducting eligible exemptions and deductions from your gross income. The tax is applied progressively — you pay a lower rate on initial income slabs and higher rates only on income that exceeds each threshold. This means moving into a "higher tax bracket" does not mean your entire income is taxed at the higher rate. Understanding marginal vs effective tax rate is crucial: your marginal rate applies only to the last rupee earned, while your effective rate is the average across all slabs.
Tax-Saving Strategies
Under the old regime, maximize deductions: Section 80C allows up to Rs 1.5 lakh through PPF, ELSS, EPF, and life insurance. Section 80D covers health insurance premiums up to Rs 25,000 (Rs 50,000 for senior citizens). Section 80CCD(1B) offers an additional Rs 50,000 deduction for NPS contributions. Home loan interest up to Rs 2 lakh is deductible under Section 24. Under the new regime, the Rs 75,000 standard deduction and lower slab rates may save you more if your total deductions are below Rs 3.75 lakh. Calculate under both regimes before choosing.
Key Information
| Parameter | Details |
|---|---|
| New Regime Standard Deduction | Rs 75000 |
| New Regime Tax-Free Limit | Up to Rs 12 lakh (with 87A rebate) |
| Old Regime 80C Limit | Rs 1.5 lakh per year |
| Old Regime 80D Limit | Rs 25000 self + Rs 50000 parents |
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Use Calculator NowFrequently Asked Questions
At what salary does old regime become better?
If your total deductions exceed Rs 3.75 lakh the old regime saves more. This is achievable with 80C (Rs 1.5L) + 80D (Rs 50K) + HRA (Rs 1.5L+) + NPS 80CCD1B (Rs 50K). For salaries above Rs 15 lakh with home loan the old regime almost always wins.
Can I switch between regimes every year?
Salaried employees can switch between old and new regime every year when filing ITR. Business owners can only switch once from old to new and cannot switch back. Calculate under both regimes before choosing.
What deductions are NOT available in new regime?
The new regime does not allow HRA exemption; LTA exemption; Section 80C (PPF ELSS LIC); Section 80D (health insurance); home loan interest under Section 24; and most Chapter VI-A deductions. Only standard deduction of Rs 75000 and employer NPS under 80CCD(2) are available.
Which tax regime should I choose — old or new?
Choose the new regime if your total deductions are below Rs 3.75 lakh. Choose the old regime if you claim HRA, 80C (Rs 1.5L), 80D, home loan interest, and NPS totaling more than Rs 3.75 lakh. Salaried employees can switch every year.
Is income up to Rs 12 lakh really tax-free?
Under the new regime for FY 2025-26, income up to Rs 12 lakh is effectively tax-free due to Section 87A rebate. After Rs 75,000 standard deduction, taxable income is Rs 11.25 lakh which qualifies for full rebate. However, income even slightly above Rs 12 lakh loses this entire benefit.
How can I save more tax legally?
Under the old regime, maximize 80C (Rs 1.5L via PPF, ELSS, EPF), 80D (Rs 25K-50K for health insurance), 80CCD(1B) (Rs 50K for NPS), HRA exemption, and home loan interest (Rs 2L under Section 24).
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Last updated: March 2026