New vs Old Tax Regime: Which One Should You Choose?
In this guide
Step-by-step Process
List Your Annual Deductions
Make a list of all deductions you claim: Section 80C (PPF, ELSS, LIC — up to ₹1.5L), 80D (health insurance — up to ₹25K), HRA, LTA, home loan interest (24b). These are only available in the old regime.
Calculate Tax Under Old Regime
Start with gross income. Subtract HRA exemption, LTA, standard deduction (₹50K), 80C (max ₹1.5L), 80D, and other applicable deductions to get taxable income. Apply old regime slabs.
Calculate Tax Under New Regime
Under the new regime, only the ₹75,000 standard deduction is allowed. Apply the new regime slabs to gross income minus ₹75K. Check if income ≤ ₹7L for 87A rebate.
Compare and Decide
General rule: If total deductions > ₹3.75 lakh (for higher income brackets), old regime may be better. If deductions < ₹3.75 lakh or income < ₹7.75 lakh, new regime is usually better.
Opt for Your Chosen Regime While Filing
Salaried individuals can switch between regimes every year at the time of ITR filing. Business owners can switch only once from new to old regime.
Official Government Portals
Common Questions
What is the break-even deduction between old and new regime?
For income around ₹15 lakh, the break-even deduction is approximately ₹3.75 lakh. If your total deductions exceed this, old regime saves more; otherwise new regime is better.
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