Old vs New Tax Regime: Which One Is Better for You?
Choosing the wrong tax regime can cost you thousands every year — yet most people decide based on incomplete information.
The old regime rewards deductions and tax planning. The new regime offers simplicity with lower slab rates. The better choice depends on your salary structure and deductions — not headlines.
What Are the Old and New Tax Regimes?
The Indian income tax system currently allows salaried individuals to choose between two tax regimes every year:
- Old Tax Regime — higher slab rates, but allows deductions and exemptions
- New Tax Regime — lower slab rates, but most deductions are not allowed
Old vs New Tax Regime: Key Differences
| Aspect | Old Regime | New Regime |
|---|---|---|
| Tax slab rates | Higher | Lower |
| 80C, 80D, HRA | Allowed | Not allowed |
| Standard deduction | Allowed | Allowed |
| Employer NPS (80CCD 2) | Allowed | Allowed |
| Complexity | Higher | Lower |
Why This Choice Confuses So Many People
- Tax rules change frequently
- Media headlines oversimplify the decision
- Employers push default choices
- Deductions feel abstract until filing time
⚠️ Choosing a regime based on salary alone is a mistake.
Deductions and reimbursements change the picture completely.
When the Old Tax Regime Usually Makes Sense
- You fully utilise 80C (₹1.5 lakh)
- You pay for health insurance (80D)
- You claim HRA or home loan interest
- You invest in NPS
✅ If you actively plan deductions, the old regime often results in lower tax.
When the New Tax Regime Works Better
- You do not claim many deductions
- You prefer simplicity over tax planning
- Your salary structure has fewer exemptions
🎉 The new regime can be beneficial if you have limited deductions
and want predictable take-home pay.
A Simple Example
| Scenario | Likely better regime |
|---|---|
| High deductions, home loan, NPS | Old Regime |
| Minimal deductions, clean salary | New Regime |