Old or new tax regime: which one fits you

The trade-off in one sentence

The new regime gives you wider slabs, lower rates and a higher rebate threshold, but removes almost every exemption and deduction. The old regime charges more on the same income but lets you reduce that income first.

Work out your break-even

The question is how much you can legitimately deduct under the old regime. Add up your HRA exemption, Section 80C investments including your own PF contribution, 80D health insurance premiums, home loan interest and anything else you genuinely claim.

Below a certain total, the new regime's lower rates win. Above it, the old regime does. Rather than memorising a threshold, run the salary calculator twice with your actual figures. The comparison takes a minute and is specific to you.

Who tends to benefit from each

People with a home loan, significant rent in a metro, and a fully used 80C limit often still come out ahead under the old regime. People early in their careers, living with family, or without large deductions usually pay less under the new one.

Practical points

Salaried employees can generally choose between regimes each year when filing. Your employer deducts TDS based on what you declare at the start of the year, so declaring accurately avoids either a large refund or a shortfall later.

Keep proof of every deduction you claim. The old regime's advantage disappears entirely if a claim is disallowed.