Old vs new tax regime: which saves you more?
Pick the regime that taxes you less
First, what a “regime” is. India lets you pay income tax in one of two ways, the old regime and the new regime. The old one gives you tax breaks, for rent, savings, a home loan and the like, but charges higher rates; the new one has lower rates but almost no tax breaks. Choosing the cheaper one is the whole question here.
The short answer. For most people, the new regime is simpler and usually the lower tax, especially if you do not claim many deductions. The old regime wins only if you claim a lot: big rent, big savings, a home loan, health insurance. The new regime is the default, so if you do nothing, you are already on it.
A 10-second check: which fits you? Pick the old regime only if 2 or more of these are true:
- You pay rent
- You put a lot into savings and investments each year
- You pay home loan interest
- You pay for health insurance
If one or none is true, the new regime is simpler and usually lower.
What the two regimes are. The new regime has lower tax rates and a large tax-free limit, but you give up most tax breaks. The old regime has higher rates, but you can lower your taxable income with tax breaks for rent, savings, a home loan, and health insurance.
| Feature | New regime | Old regime |
|---|---|---|
| Status | Default | Optional |
| Tax rates | Lower | Higher |
| Standard deduction | ₹75,000 | ₹50,000 |
| Tax breaks (rent, savings, loan) | Not allowed | Allowed |
| Tax-free income up to | ₹12 lakh | ₹5 lakh |
| Best for | Few tax breaks to claim | Many to claim |
Figures are for FY2025-26. Verify the current ones on incometax.gov.in.
A rupee example. Say you earn ₹12.75 lakh in salary with few tax breaks to claim. Under the new regime, the ₹75,000 standard deduction brings your income to ₹12 lakh, which is tax-free, so you pay ₹0 for FY2025-26. Under the old regime you would owe tax on that income unless your tax breaks, like rent, savings, and home loan interest, are large enough to bring it right down. Whether those break your tax lower than the new regime is the whole question, so it pays to compute both.
A few examples.
| Your situation | Likely better | Why |
|---|---|---|
| Just the standard deduction, little else | New | Lower rates, nothing to claim |
| Rent, big savings, and a home loan | Old, worth checking | Big tax breaks cut taxable income |
| Salary up to about ₹12.75 lakh, few claims | New | Income up to ₹12 lakh is tax-free |
| High income, few tax breaks | New | Lower rates win without tax breaks |
Still not sure? Open the tax calculator on incometax.gov.in, put in your income and what you claim, and it shows your tax under both regimes. Pick the lower one. A salaried person can choose again each year, so it is not a permanent decision.
New to this? Start on the learn page.
This is general education, not tax advice. The figures here are for FY2025-26 and can change each Budget, so confirm the current slabs, limits, and rules on incometax.gov.in or with a qualified tax professional.
Questions people ask
Which tax regime is better, old or new?
For most people the new regime is simpler and usually lower, especially if you do not claim many deductions. Pick the old regime only if you claim a lot, like rent, big savings, a home loan, and health insurance. If unsure, compute both on incometax.gov.in and pick the lower.
What is the new tax regime, in short?
The default for FY2025-26, with lower rates and a large tax-free limit but very few tax breaks. With the 75,000 rupee standard deduction, a salaried person earning up to about 12.75 lakh pays no tax. Verify on incometax.gov.in.
Can I switch between the old and new regime?
A salaried person can usually choose each year when filing. Your employer also asks you to pick one at the start of the year for TDS. Confirm the current switching rules on incometax.gov.in.
Does the new regime allow rent or savings tax breaks?
No. The new regime drops most tax breaks, including those for rent and 80C savings. Those are claimed under the old regime, which is why the old regime can win if your deductions are large.
Source: Income tax rules for FY2025-26 (AY2026-27). Verify current figures on incometax.gov.in.