Old vs New Tax Regime: Difference, Slabs & Which to Choose
India offers two income tax regimes: the old regime (with deductions) and the new regime (with lower rates and minimal deductions). From FY 2024-25, the new regime is the default. This guide explains the difference, tax slabs, when to choose which, and how to decide.
The old regime is the traditional income tax structure with higher tax rates but allows various deductions and exemptions. You can claim deductions under Section 80C, 80D, HRA, LTA, home loan interest (80EE, 80EEA), education loan interest (80E), NPS, and more.
Tax is calculated on taxable income = Gross income minus deductions. The old regime has fewer but steeper tax slabs.
The new regime (Section 115BAC) was introduced to simplify tax filing. It has lower tax rates and more tax slabs, but disallows most deductions except:
- Standard deduction: ₹75,000 (FY 2024-25)
- Employer's NPS contribution
- Leave encashment
- Transport allowance for divyang employees
From FY 2024-25, the new regime is the default. If you want to use the old regime, you must opt for it while filing.
Old Regime
- Up to ₹2.5 lakh: Nil
- ₹2.5L – ₹5L: 5%
- ₹5L – ₹10L: 20%
- Above ₹10L: 30%
New Regime
- Up to ₹3 lakh: Nil
- ₹3L – ₹7L: 5%
- ₹7L – ₹10L: 10%
- ₹10L – ₹12L: 15%
- ₹12L – ₹15L: 20%
- Above ₹15L: 30%
Rebate 87A: New regime — 100% rebate for income up to ₹7 lakh (effectively tax-free). Old regime — rebate up to ₹12,500 for income up to ₹5 lakh.
| Aspect | Old Regime | New Regime |
|---|---|---|
| Deductions | 80C, 80D, HRA, LTA, home loan, NPS, etc. | Most not allowed |
| Standard deduction | ₹50,000 | ₹75,000 |
| Tax slabs | 4 slabs (0%, 5%, 20%, 30%) | 6 slabs (0%, 5%, 10%, 15%, 20%, 30%) |
| Rebate 87A | Up to ₹12,500 for income ≤ ₹5L | Full rebate for income ≤ ₹7L |
| Default | Opt-in required | Default from FY 2024-25 |
- Income below ₹7 lakh (effectively tax-free)
- Few or no tax-saving investments
- Prefer simplicity — no need to track deductions
- Deductions below ₹2–3 lakh
- Substantial deductions (₹2–3 lakh or more) from 80C, 80D, HRA, home loan
- Heavy investments in PPF, ELSS, LIC, NPS
- Home loan interest (80EE, 80EEA)
- Education loan interest (80E)
- High HRA or LTA claims
How to Decide
The best way to decide is to calculate tax under both regimes for your income and deductions. Use our income tax calculator to compare old vs new regime side by side.
For salaried individuals, you can switch regimes every year. For business income, the choice is made at the time of filing. If you have a CA or tax advisor, they can help you optimize based on your specific situation.
Frequently Asked Questions
- What is the difference between old regime and new regime?
- The old regime allows deductions (80C, 80D, HRA, LTA, home loan interest, etc.) but has higher tax rates. The new regime has lower tax rates and more slabs but disallows most deductions except standard deduction of ₹75,000. New regime is now the default from FY 2024-25.
- Which regime is better for me?
- If you have substantial deductions (₹2–3 lakh or more) from investments, home loans, or insurance, the old regime may be better. If you have few deductions or earn below ₹7 lakh, the new regime is usually better. Use our income tax calculator to compare.
- Can I switch between old and new regime every year?
- Yes. Salaried individuals can choose between regimes each financial year. For business income, the choice is made at the time of filing. From FY 2024-25, new regime is the default — you must opt for old regime actively.
- What is the rebate under Section 87A?
- Under new regime: 100% rebate for income up to ₹7 lakh (effectively tax-free). Under old regime: rebate up to ₹12,500 for income up to ₹5 lakh.
- What is standard deduction?
- Standard deduction is a flat deduction from salary income. For FY 2024-25: ₹75,000 under new regime, ₹50,000 under old regime. It reduces the taxable salary without needing to submit proofs.
- Who is the default regime for?
- From FY 2024-25 (AY 2025-26), the new regime is the default. If you want to use the old regime, you must opt for it while filing your return.
Compare your tax under both regimes
Use our free income tax calculator to compare old vs new regime side by side. Enter your income and deductions to see which regime saves you more.
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