Short answer: the new regime wins for most salaried people. Under current rules a taxable income up to Rs 12 lakh (about Rs 12.75 lakh of salary, after the standard deduction) carries no tax, and the slabs above that are lower. The old regime only pulls ahead if your deductions — 80C, 80D, HRA, home-loan interest, NPS — add up to a large number, roughly Rs 4 lakh or more. Always confirm the year's slabs and rebate limit before you file, and check with a CA if your situation is complex.
The new regime is the default. It has wider, lower slabs and a large rebate, but it strips out almost every deduction and exemption. The old regime keeps the familiar breaks — 80C investments, health premium under 80D, HRA, the Rs 2 lakh home-loan interest deduction, the extra Rs 50,000 NPS deduction under 80CCD(1B) — but its slabs are steeper and the tax-free rebate runs only to a much lower income.
You choose one each year. A salaried person with no business income can switch freely from one year to the next.
The old regime is worth the paperwork only when your deductions are big enough to close the slab gap. As a rough guide — confirm against the current year's numbers:
| Your deductions (80C + 80D + HRA + home loan + NPS) | Likely better |
|---|---|
| Under Rs 2 lakh | New regime |
| Rs 2 lakh to Rs 4 lakh | Usually new; run both |
| Over Rs 4 lakh | Old regime may win |
| Rent + home loan + full 80C + NPS | Old regime usually wins |
The people who clear that bar are typically paying rent in a metro, servicing a home loan, maxing 80C, and putting Rs 50,000 into NPS. If you are doing two or three of those, the old regime deserves a proper calculation.
Every payroll portal and the income-tax e-filing site has a comparison tool. Enter your gross salary and your actual deductions — the ones you will really claim, not the ones you intend to — and compare the tax under both. Do this in April, not in March, so the choice drives your investing rather than the other way round.
A trap: don't lock Rs 1.5 lakh into a tax-saver just to justify the old regime. If the only reason you are buying an ELSS unit or paying an insurance premium is the deduction, the new regime with its lower slab is usually the cleaner choice — you keep the money and the flexibility.
Your tax choice and your goal plan feed each other. If you land in the new regime, your 80C investments no longer have a tax job to do, so they should be chosen purely on the goal they fund — which is how a separate SIP per goal, each with its own equity-debt-gold glide path, is meant to work anyway. The tax planning tool and the 6-step goal plan take the same inputs, so you can see the after-tax picture in one place.
Q. Can I switch between regimes every year?
A. A salaried person with no business income can choose afresh each year at filing. Someone with business income gets a one-time switch and stricter rules.
Q. Does the new regime really mean zero tax up to Rs 12 lakh?
A. Under current rules the rebate makes tax nil up to a Rs 12 lakh taxable income, and the standard deduction lifts the salary figure a little higher. Confirm the exact limit for the year you are filing.
Q. I have a home loan. Which regime?
A. The Rs 2 lakh interest deduction on a self-occupied home is available only in the old regime. If you also pay rent or claim full 80C, run both — the old regime often wins.
Q. Is HRA taxable under the new regime?
A. The HRA exemption is not available in the new regime, so the allowance is fully taxable there. It stays exempt, subject to the formula, under the old regime.
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