Since 2020, every salaried Indian files under one of two regimes. The new regime offers lower slab rates but removes almost all deductions — no 80C, no HRA, no home-loan interest. The old regime keeps them all, at higher rates. Which one saves you more is not a matter of opinion; it is one subtraction, done twice.
How to decide in 60 seconds
Compute your tax twice: once under the new regime (lower slabs, standard deduction, nothing else), once under the old regime (higher slabs minus every deduction you actually claim — 80C, 80D, HRA, home-loan interest). The smaller number wins. Nothing else — not what your colleague does, not what an app defaults to — matters.
Who tends to suit which
The new regime usually wins for those with few deductions — renters without HRA, people who don't max out 80C, simpler finances. The old regime can win for heavy claimers: large HRA in metros, home-loan interest, full 80C plus 80D health premiums, NPS contributions.
The break-even is not a fixed income level — it moves with your deduction stack. A ₹12-lakh earner with ₹4.5 lakh of genuine deductions can still beat the new regime's lower rates; the same salary with no deductions will not come close.
The mistakes that cost money
Three common ones: assuming the new regime is always better because slabs are lower (deductions can outweigh the rate cut); assuming the old regime is better because “my father always did” (claiming ₹80,000 of 80C saves far less than people imagine); and forgetting that the regimes differ on surcharge and carry-forward rules — some losses and deductions behave differently between them.
And the honest caveat: slabs and rules change with Budgets. The method above survives every Budget; the numbers do not. Re-run the subtraction every year.
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Message IFI on WhatsApp →Quick recap
- New regime: lower slabs, standard deduction, almost nothing else claimable.
- Old regime: higher slabs minus every deduction you actually take.
- Compute both every year; the smaller tax wins. That's the whole decision.
- Salaried filers can choose fresh at filing time each year.
Frequently asked questions
Can I switch between the old and new tax regime?
Salaried taxpayers can effectively choose each year at filing time, regardless of what payroll used. Business income has stricter rules - once you opt out of the new regime you can return only under conditions. The choice is never permanently locked for salary.
Is the new tax regime better for everyone?
No. It wins when your total deductions are small; the old regime can win when you genuinely claim a large stack - HRA in a metro, home-loan interest, full 80C and 80D. The only reliable answer is computing your tax under both.
Can I claim 80C in the new regime?
No. The new regime removes 80C, 80D, HRA, home-loan interest and most other deductions, keeping only the standard deduction and a few specific ones. Those live in the old regime alone.
Does my employer's choice of regime bind me?
No. Payroll withholding uses whatever you register, but your final return can pick either regime. If your situation changed - say you forgot a deduction - you can file under the other one.