Old vs new regime — how to actually pick for FY 2025-26
The new regime has been the default since FY 2023-24, and under the Finance Act 2025 income up to ₹12 lakh pays no tax there after the Sec 87A rebate. The old regime can still win for taxpayers with large deductions — home-loan interest, HRA, 80C and 80D together. Here's how to choose, with three worked examples.
The 30-second answer
If you are a typical salaried earner without ₹1.5 L of 80C savings, ₹50K of NPS, HRA exemption and home-loan interest, the new regime is almost certainly better. If you have most or all of those deductions, the old regime can still beat it — sometimes by ₹50,000 or more a year.
The cleanest way to decide is to compute both and pick the lower number. Our income tax calculator does this side-by-side with one click. But knowing why one wins helps you plan investments through the year.
How the two regimes actually differ
| Feature | Old regime | New regime |
|---|---|---|
| Standard deduction (salaried) | ₹50,000 | ₹75,000 |
| Section 80C (LIC, PPF, ELSS, etc.) | Up to ₹1,50,000 | Not available |
| Section 80CCD(1B) NPS | Up to ₹50,000 | Not available |
| Section 80D health insurance | Up to ₹1,00,000 | Not available |
| HRA exemption | Available | Not available |
| Home loan interest (self-occupied) | Up to ₹2,00,000 | Not available |
| Home loan interest (let-out) | Full · ₹2 L cross-head cap | Full · ₹2 L cross-head cap |
| Section 80CCD(2) employer NPS | 10% of basic (private) | 14% of basic |
| Section 87A rebate | Up to ₹5 L taxable | Up to ₹12 L taxable |
| Surcharge cap above ₹5 Cr | 37% | 25% |
Three worked examples
Case 1: Gross ₹15 L · no rent · no home loan
| Old regime | New regime | |
|---|---|---|
| Gross | 15,00,000 | 15,00,000 |
| Standard deduction | (50,000) | (75,000) |
| 80C | (1,50,000) | — |
| 80D | (25,000) | — |
| Taxable income | 12,75,000 | 14,25,000 |
| Tax (incl. cess) | ~1,98,900 | ~93,600 |
Case 2: Gross ₹22 L · ₹30 K monthly rent · home loan interest ₹1.8 L
| Old regime | New regime | |
|---|---|---|
| Gross | 22,00,000 | 22,00,000 |
| Standard deduction | (50,000) | (75,000) |
| HRA exemption (approx) | (2,40,000) | — |
| 80C + 80CCD(1B) | (2,00,000) | — |
| 80D | (50,000) | — |
| Home loan interest (let-out) | (1,80,000) | (1,80,000) |
| Taxable income | 14,80,000 | 19,45,000 |
| Tax (incl. cess) | ~2,57,400 | ~2,69,400 |
Case 3: Gross ₹9 L (pension + FD interest)
| Old regime | New regime | |
|---|---|---|
| Gross | 9,00,000 | 9,00,000 |
| Standard deduction (pensioner) | (50,000) | (75,000) |
| 80TTB (FD interest, senior) | (50,000) | — |
| 80C / 80D | (75,000) | — |
| Taxable income | 7,25,000 | 8,25,000 |
| Tax (incl. cess) | ~57,200 | NIL (rebate) |
Rules of thumb
- Total deductions you can realistically claim under ₹2 L? New regime almost always wins.
- Between ₹2 L and ₹4 L of deductions (80C + 80D + HRA + home-loan interest)? Close call — model both.
- Above ₹4 L of deductions? Old regime usually wins, especially if you are in metro rent + have a self-occupied home loan.
- Income above ₹5 Cr? New regime almost always wins because the surcharge is capped at 25% (vs 37% under old).
- Senior citizens with moderate income? The ₹12 L 87A rebate is hard to beat — new regime tends to win.
How to actually decide
- List every deduction you actually claim (80C, 80D, HRA, NPS, home loan interest). Use last year's ITR as a starting point.
- Compute taxable income under each regime.
- Compute tax under each (including 87A rebate, surcharge if applicable, and 4% cess).
- Pick the lower one — and for old-regime, make sure your actual 80C / 80D investments will land before 31 March.
Our income tax calculator automates steps 2–3. Run it once with last year's numbers, once with this year's expected income.
One last thing
Most salaried clients we onboard at Finclar default to thinking "old regime gives me deductions, so it must be better." That has been wrong for the last 2 years for most of them. The arithmetic flipped after Budget 2023 and again after Budget 2025. Don't trust the rule that worked in 2020 — re-run the numbers every year.