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Old vs new income-tax regime: a salaried worked example

The new regime has lower slab rates but strips out most deductions. Whether it wins depends on how much you claim under the old one.

The trade-off in one line

Old regime: higher rates, but you can subtract 80C, HRA, home-loan interest, health insurance, NPS and more. New regime: lower rates and a standard deduction, but almost nothing else.

What still applies under the new regime

  • Standard deduction on salary.
  • Employer's NPS contribution under 80CCD(2).
  • The rebate that makes income up to the threshold effectively tax-free.

What you lose: 80C (PPF, ELSS, life insurance, principal repayment), 80D (health insurance), HRA, LTA, home-loan interest on a self-occupied house, 80E, 80G and the rest.

A worked comparison

Take a salary of ₹12,00,000 with ₹1,50,000 in 80C, ₹25,000 in 80D and ₹1,50,000 of self-occupied home-loan interest — ₹3,25,000 of deductions plus the standard deduction.

  • Old regime taxable income: about ₹8,25,000. Tax under old slabs lands in the mid ₹70,000s plus cess.
  • New regime taxable income: about ₹11,25,000 after only the standard deduction. Tax under the lower new slabs is broadly similar once the rebate and rate cuts are applied.
  • The person who claims those deductions is close to break-even; someone claiming little or nothing is clearly better off on the new regime.

Rates, slabs and the rebate threshold change most Budgets. Always run the current year's numbers before choosing — a calculator that uses this year's slabs is the only reliable way.

How to choose each year

  1. Add up every deduction you will actually claim — not what you could in theory.
  2. Compute tax both ways for your gross salary.
  3. Salaried taxpayers can switch regime year to year; those with business income get one switch back to old, then it locks.

Try it on the site

Open the income-tax calculator

This article is general information, not legal or financial advice. A card made on this site is a personal reference copy with no legal validity — only the document issued by your RTO or the official digital licence is valid on the road.

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