India now has two parallel income tax systems — and the one you pick changes how much you pay. The new regime has lower rates but strips out most deductions. The old regime keeps HRA, 80C, and 80D but taxes you at higher rates. Here's how to calculate which one actually costs you less.
From FY 2024-25 onward, the new tax regime is the default. If you want to opt for the old regime, you must explicitly declare it — either through your employer at the start of the financial year, or in your ITR. Once you file a return under the old regime, you can switch back to the new one the following year.
| Income Range | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Standard deduction of ₹75,000 is allowed under the new regime for salaried employees from FY 2024-25, making the effective zero-tax limit ₹7.75 lakh after the 87A rebate.
| Income Range | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
A 4% Health & Education Cess is added on top of the calculated tax liability under both regimes. This is applied after all rebates and surcharges.
Section 87A provides a rebate that effectively brings your tax liability to zero if your net taxable income does not exceed ₹7 lakh under the new regime (or ₹5 lakh under the old regime). The rebate equals your computed tax, capped at ₹25,000 (new) or ₹12,500 (old).
Special rate income is excluded from 87A. Income from capital gains taxed at special rates (STCG at 15%/20%, LTCG above ₹1.25L at 12.5%) does not qualify for the 87A rebate — your total tax may still be payable even if your salary income is below ₹7 lakh.
| Section | Deduction | Limit |
|---|---|---|
| 80C | PF, PPF, ELSS, life insurance, NSC, home loan principal | ₹1,50,000 |
| 80D | Health insurance premium (self & family) | ₹25,000 (₹50,000 if senior citizen) |
| 80CCD(1B) | NPS additional contribution | ₹50,000 |
| HRA exemption | Partial HRA exempt (if renting) | Lowest of 3 calculations |
| Standard deduction | Flat deduction for salaried employees | ₹50,000 (old regime) |
| Home loan interest (24b) | Interest on home loan for self-occupied property | ₹2,00,000 |
Income: ₹15 lakh gross salary. Deductions available: 80C ₹1.5L, 80D ₹25K, HRA ₹1.2L, NPS 80CCD(1B) ₹50K.
| Step | Old Regime | New Regime |
|---|---|---|
| Gross income | ₹15,00,000 | ₹15,00,000 |
| Standard deduction | −₹50,000 | −₹75,000 |
| HRA exemption | −₹1,20,000 | Not available |
| Section 80C | −₹1,50,000 | Not available |
| Section 80D | −₹25,000 | Not available |
| NPS 80CCD(1B) | −₹50,000 | Not available |
| Taxable income | ₹11,05,000 | ₹14,25,000 |
| Tax on slabs | ₹1,73,500 | ₹1,72,500 |
| Cess (4%) | ₹6,940 | ₹6,900 |
| Total tax | ₹1,80,440 | ₹1,79,400 |
In this example, both regimes produce almost identical tax — the new regime wins by a small margin (~₹1,000). With higher deductions or home loan interest, the old regime would win. The crossover depends on your specific deduction profile — use ToolLoom's Income Tax Calculator with your actual numbers.
The standard deduction is a flat deduction available to all salaried employees and pensioners — no proof or investment required. Under the old regime it is ₹50,000. Under the new regime, it was increased to ₹75,000 from FY 2024-25. Family pensioners can claim ₹15,000 as standard deduction.