Should I choose the old or the new tax regime?

Lesson 18 of 28 · Old or new tax regime · 5 min read · Reviewed 15 Oct 2026

Quick answer

The new regime has lower rates but almost no deductions; the old one allows 80C, 80D, HRA and home loan interest. For FY 2025-26 a salary up to ₹12.75 lakh pays no tax in the new regime. On a ₹15 lakh salary the new regime costs ₹97,500, and the old one costs less only if your deductions pass about ₹5.4 lakh.

Both regimes tax the same income. The new regime cuts the rates and gives a ₹75,000 standard deduction. The old regime keeps higher rates but lets you subtract deductions.

Add up the deductions you actually use. If they are small, the new regime usually costs less.

Salaried people can choose each year when filing the return.

Key idea: Rates for FY 2025-26 from Budget 2025, before surcharge on income above ₹50 L. Check the latest Budget or ask your CA before filing.

Try the calculator and the one-question quiz on this page to check your own numbers.

Common questions

Which deductions does the old regime allow?

80C up to ₹1.5 lakh (EPF, PPF, ELSS, life premium, principal), 80D for health insurance, HRA, home loan interest up to ₹2 lakh, and NPS up to ₹50,000 extra, among others.

Why is ₹12.75 lakh tax-free in the new regime?

The ₹75,000 standard deduction brings it to ₹12 lakh, and a rebate cancels the tax on taxable income up to ₹12 lakh.

Can I switch every year?

Salaried people can. People with business income can switch back to the old regime only once.

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