India runs two parallel income-tax systems, and you are taxed under one of them each year. The new regime – the default since FY 2023-24 – charges lower slab rates but strips out almost every deduction; the old regime taxes at higher rates but lets you claim 80C, HRA, 80D and more. Which one costs less depends entirely on the deductions you actually claim.
Old vs new regime at a glance (FY 2026-27)
What is the difference between the old and new tax regime?
The old regime is the original system: relatively high slab rates, softened by a long list of deductions and exemptions you can claim for investments, insurance, rent and loan interest. The new regime, introduced in 2020 and reshaped since, does the opposite – lower slab rates spread across more, narrower bands, but almost none of those deductions.
Since FY 2023-24 the new regime is the default. If you make no choice, your income is taxed under it. The old regime is now something you opt into, and you have to say so.
Which deductions does each regime allow?
This is where the two systems really part ways. The new regime keeps a short list; the old regime keeps the long one.
| Feature | New regime | Old regime |
|---|---|---|
| Slab rates | Lower, more bands | Higher, fewer bands |
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 80C (PPF, ELSS, EPF, etc.) | Not available | Up to ₹1.5 lakh |
| Section 80D (health premium) | Not available | Available |
| HRA exemption | Not available | Available |
| Employer NPS – 80CCD(2) | Available | Available |
| 87A rebate – nil tax up to | ₹12 lakh | ₹5 lakh |
| Status since FY 2023-24 | Default | Opt-in |
The new regime keeps only the ₹75,000 standard deduction for salaried taxpayers and pensioners, plus the employer's NPS contribution under Section 80CCD(2). The familiar investment- and expense-linked deductions – 80C, 80D, HRA, 80TTA and interest on a home loan – sit only in the old regime.
Is the new regime always cheaper?
No. The lower rates help everyone, but the old regime can still win once your deductions are large enough to offset its higher rates. Someone renting in a metro, paying a home-loan EMI and using their full 80C and 80D limits may find the old regime taxes less. Someone with few deductions usually pays less under the new regime.
There is a crossover point, and it is different for every person because it depends on the exact deductions you claim. That is why the honest answer is to run your own numbers rather than follow a rule of thumb.
Can you switch between the regimes?
If your income is only salary, interest or capital gains, you can pick a regime afresh every financial year – at the time of filing, and separately when you declare to your employer for TDS. If you have business or professional income, the rules are stricter: once you opt for the old regime you can return to the new one only once, after which the choice is locked.
How does your regime affect monthly TDS?
Your employer deducts TDS on salary based on the regime you declare at the start of the year. Declare nothing, and they apply the new regime by default. That declaration is provisional: you can still pick the other regime when you file your return, and any gap is settled then as a refund or a top-up. So a salaried person effectively chooses twice – once for how much tax comes out each month, and once for the final bill at filing.
A note on the numbers
This is general information, not tax advice. The slab rates, rebate thresholds and deduction limits above are for FY 2026-27; they are set in the annual Budget and can change. Which regime works out lower depends on your specific income and deductions.
Related NYVO guides
- Section 87A Rebate: How the Zero-Tax Threshold Works – why new-regime tax is nil up to ₹12 lakh, and how the rebate differs from an exemption.
- Marginal Relief: How It Softens the Rebate Cliff – what happens to your tax just above that ₹12 lakh line.
- Income Tax Slabs in India – the bands and rates behind each regime.
The two regimes are not better or worse in the abstract. One rewards a simple, deduction-light return; the other rewards the paperwork of claiming. The calculator settles it in your case – the tax code does not pick for you.
