How much deduction do I need for the old regime to be better?

As a rough guide, you usually need total deductions well above ₹3.75–5 lakh (including the standard deduction) before the old regime beats the new one, and the exact break-even rises with income. The only reliable way to know is to compute both for your own numbers.

Which regime is the default?

The new regime is the default. You have to actively opt for the old regime, and salaried taxpayers can switch between them each year.

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Old vs New Tax Regime: Which Is Better for You? (FY 2025-26)

Q: Is the new tax regime better than the old one?

For most salaried people with few deductions, the new regime is better because its slab rates are lower and the 87A rebate makes tax nil up to ₹12 lakh of taxable income. The old regime wins only when your deductions — 80C, HRA, home-loan interest and the rest — are large enough to pull your taxable income well below the new-regime figure.

By Paarth · Published 17 July 2026 · Updated 17 July 2026

For most salaried people with modest deductions, the new regime is now the better choice — its slab rates are lower and a rebate makes tax nil up to ₹12 lakh of taxable income. The old regime wins only when your deductions are large — think a full ₹1.5 lakh under 80C, meaningful HRA, and home-loan interest — enough to drag your taxable income far below what the new regime would tax. The honest answer is that it depends on your own numbers, so this guide shows the slabs, the rules, and worked examples, and points you to a calculator that settles it in seconds.

Compare both regimes on your salarySee your exact tax under old vs new, with the rebate and cessOpen Income Tax Calculator →

The two regimes at a glance

India runs two parallel income-tax systems. The new regime offers lower rates across more slabs but strips away almost every deduction. The old regime keeps higher rates but lets you subtract a long list of deductions before tax is calculated. Both add a 4% health and education cess at the end.

Under the new regime for FY 2025-26, after a ₹75,000 standard deduction, tax is nil up to ₹4 lakh, then 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh, and 30% above that. Crucially, a section 87A rebate makes the tax nil up to ₹12 lakh of taxable income — roughly ₹12.75 lakh of salary once the standard deduction is applied.

Under the old regime, after a ₹50,000 standard deduction, tax is nil up to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh, and 30% above ₹10 lakh (the nil band is ₹3 lakh for those aged 60–80 and ₹5 lakh for 80+). Here the 87A rebate makes tax nil only up to ₹5 lakh of taxable income — but you get to claim 80C, HRA, home-loan interest, 80D, NPS and more first.

What the old regime lets you deduct

This is the whole reason the old regime still exists. The common deductions are:

Section 80C — up to ₹1.5 lakh for EPF, PPF, ELSS, life insurance, children's tuition, home-loan principal and more.
House Rent Allowance (HRA) — exempt based on your rent, salary and city.
Home-loan interest — up to ₹2 lakh a year on a self-occupied house under section 24(b).
Section 80D — health-insurance premiums for you and your family.
NPS under 80CCD(1B) — an extra ₹50,000.

Stack these up and a person earning ₹15 lakh can push taxable income down by ₹4–5 lakh or more. That is exactly where the old regime starts to compete.

Worked examples

Example 1 — few deductions. Salary ₹12 lakh, claiming only 80C (₹1.5 lakh) and 80D (₹25,000). Old-regime taxable income is about ₹9.75 lakh, giving roughly ₹1.12 lakh of tax after cess. New-regime taxable income is ₹11.25 lakh, which is under ₹12 lakh — so the rebate makes it zero. The new regime wins outright.

Example 2 — heavy deductions. Salary ₹20 lakh, claiming the full 80C, ₹2 lakh home-loan interest, ₹50,000 NPS, ₹50,000 under 80D and ₹2 lakh of HRA. Even then, the old regime works out only marginally different from the new one — in many such cases the new regime still edges ahead by a small amount. The gap is close enough that you should never guess.

The pattern is consistent: below roughly ₹12–13 lakh of salary the new regime almost always wins, and above it the old regime only pulls ahead when your deductions are genuinely large and well-documented.

Don't guess — run your real numbersThe calculator applies the rebate, marginal relief and cess for both regimesCompare my tax →

A simple way to decide

Add up every deduction you can honestly claim, including the ₹50,000 old-regime standard deduction. If that total is small — say under ₹3–4 lakh — the new regime is almost certainly better and simpler, with no proofs to maintain. If your deductions are large because you have a home loan, pay meaningful rent, and max out 80C, it is worth computing both. Because salaried taxpayers can switch each year, you are never locked in.

Frequently asked questions

Are the slabs the same for FY 2026-27?

Yes. Budget 2026 kept the new-regime slabs and rebate unchanged, so the same structure applies to both financial years.

Can I claim HRA in the new regime?

No. HRA exemption and most other deductions are only available under the old regime. The new regime mainly allows the standard deduction and the employer's NPS contribution.

Does the new regime really mean no tax up to ₹12 lakh?

Up to ₹12 lakh of taxable income the 87A rebate makes tax nil, which is about ₹12.75 lakh of salary after the standard deduction. Just above ₹12 lakh, marginal relief keeps the jump gentle.

Paarth builds the free calculators on PropertiesOnline.in and has been writing about money and everyday tools in India for over 15 years. These guides are meant to be practical, honest, and checkable — never a substitute for advice from a qualified tax professional.