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Old vs New Tax Regime in India — Which Should You Choose?
The new regime is now the default and tax-free up to ₹12 lakh — but the old regime still wins for some. Here's how to decide.
8 min read · Reviewed March 2026
What changed, and why it matters
India now runs two parallel income-tax systems. The new regime offers lower slab rates but removes most deductions and exemptions. The old regime keeps higher rates but lets you subtract popular deductions like 80C investments, HRA and home-loan interest. Since the 2025 budget the new regime is the default and far more generous than before.
Under the new regime in 2026, salaried taxpayers get a ₹75,000 standard deduction and a §87A rebate that makes income up to ₹12 lakh taxable (about ₹12.75 lakh gross) effectively tax-free. That single change pulled most middle-income earners toward the new regime.
| Taxable income | Rate |
|---|---|
| Up to ₹4 lakh | 0% |
| ₹4–8 lakh | 5% |
| ₹8–12 lakh | 10% |
| ₹12–16 lakh | 15% |
| ₹16–20 lakh | 20% |
| ₹20–24 lakh | 25% |
| Above ₹24 lakh | 30% |
When the old regime still wins
The old regime can still come out ahead if you claim large deductions. If you max out 80C (₹1.5 lakh), pay significant rent with an HRA exemption, have home-loan interest under section 24, and contribute to NPS and health insurance, your taxable income can drop enough that the old regime's higher rates apply to a much smaller base.
As a rough rule, the more you genuinely deduct, the more attractive the old regime becomes — but only if those deductions reflect real spending and investment you'd do anyway. Chasing deductions purely to save tax often leaves you worse off in cash terms.
How to actually decide
Don't guess — compute both. Add up the deductions you realistically claim, then calculate tax under each regime on the same gross salary. The regime with the lower total tax wins for that year, and in India you can switch each year if you're salaried (business income has tighter rules).
Our Old vs New Regime calculator does exactly this side by side: enter your salary and the deductions you'd claim, and it shows the tax under both regimes plus a clear recommendation, so you can pick the one that leaves more in your hand.
Related
Frequently Asked Questions
+Is 12 lakh salary tax free in India?
Under the new regime, taxable income up to ₹12 lakh attracts a full §87A rebate, so tax is effectively zero. With the ₹75,000 standard deduction, a gross salary up to about ₹12.75 lakh can be tax-free — provided you're on the new regime.
+Can I switch between old and new regime every year?
Salaried individuals can choose their regime each financial year. Those with business or professional income face restrictions on switching back to the new regime once they opt out. Always compare both before filing.
Estimate only — not tax advice. Figures are estimates based on publicly available tax rules and may not reflect your full circumstances. See our methodology & sources (last reviewed June 2026). Always confirm with an official tax authority or a licensed adviser before making decisions.