Old vs New regime — the decision before you file
In this chapter: Slab-by-slab comparison for FY 2024-25 and FY 2025-26 · Which regime suits which deduction profile · The default regime and the option to switch each year · A simple rule of thumb that gets it right 90% of the time
Since FY 2023-24, the New tax regime (lower slabs, fewer deductions) is the default. The Old regime (higher slabs but allows 80C, 80D, HRA, LTA, home-loan interest, and more) must be actively chosen each year. Salaried filers can switch between regimes freely each year; self-employed filers can switch only once. Choosing the wrong regime can cost ₹20,000-1L+ depending on income and deductions.
Quick comparison for FY 2025-26 (illustrative, verify current slabs): New regime has slabs starting at 0% up to ₹3L, then graded up to 30% above ₹15L. Standard deduction of ₹75,000 for salaried. Old regime: 0% up to ₹2.5L, 5% to ₹5L, 20% to ₹10L, 30% above. Standard deduction of ₹50,000. The Old regime allows 80C (₹1.5L), 80D (₹25-1L), HRA, home-loan interest (up to ₹2L for self-occupied), and others. The break-even depends on your deductions: if you genuinely use ₹2L+ of 80C/D/HRA/home-loan deductions, Old usually wins. Otherwise New.
The 90% rule: if your total deductions (including HRA, 80C, 80D, NPS, home-loan interest) exceed roughly ₹3.75L for someone in the 20-30% bracket, Old regime tends to win. Below that, New regime wins. Test both on the income-tax department's comparison utility before filing — it is free and gives the exact answer. Also note: the New regime's lower rebate threshold (income up to ₹7L for FY 2024-25 results in zero tax under Section 87A) makes it especially attractive for sub-₹7L incomes regardless of deduction profile.