The new regime is the default, but it is not always the cheaper one. If you claim large deductions such as HRA, home loan interest and the full 80C limit, the old regime can still win. This tool shows you the exact difference so you can choose with confidence before you file or declare to your employer.
How income tax is calculated
Tax = (Slab tax on taxable income − Rebate + Surcharge) × 1.04
- Taxable income
- Gross income minus the standard deduction and any eligible deductions
- Slab tax
- Each slice of income taxed at its own slab rate
- Rebate
- Section 87A rebate for resident individuals below the income limit
- × 1.04
- 4% health and education cess on tax plus surcharge
New regime slabs: up to ₹4 lakh nil, ₹4 to 8 lakh 5%, ₹8 to 12 lakh 10%, ₹12 to 16 lakh 15%, ₹16 to 20 lakh 20%, ₹20 to 24 lakh 25% and above ₹24 lakh 30%. Salaried people get a ₹75,000 standard deduction, and the rebate makes tax nil when taxable income is ₹12 lakh or less. Just above ₹12 lakh, marginal relief caps your tax at the amount by which income crosses ₹12 lakh.
Old regime slabs: nil up to ₹2.5 lakh (₹3 lakh for ages 60 to 80, ₹5 lakh for 80+), 5% up to ₹5 lakh, 20% from ₹5 to 10 lakh and 30% above ₹10 lakh. The standard deduction is ₹50,000 and the rebate applies up to ₹5 lakh of taxable income. Deductions like 80C (₹1.5 lakh), 80D, HRA and home loan interest (₹2 lakh) are allowed.
Surcharge applies above ₹50 lakh (10%), ₹1 crore (15%) and ₹2 crore (25%). The old regime has a further 37% band above ₹5 crore. Marginal relief is applied automatically at each threshold.
Old or new regime: which should you choose?
A quick rule of thumb: if your total deductions (other than the standard deduction) are below roughly ₹4 to 5 lakh, the new regime is usually cheaper at most income levels. Above that, run the numbers, because the answer depends on your exact income and mix of deductions.
Salaried employees can switch regimes every year when filing their return. People with business or professional income can switch back from the new regime only once, so the choice matters more for freelancers and business owners.
- New regime suits people with few deductions and those who value simplicity.
- Old regime suits people paying rent in a metro, repaying a home loan and maxing out 80C and 80D.
- Employer NPS contributions and the standard deduction are the main deductions still allowed in the new regime.