New or old tax regime: which one is better for me?
Short answer: It depends on how much you can claim in deductions and exemptions. The new regime has lower rates and a larger rebate but few deductions. The old regime has higher rates but lets you claim deductions such as HRA, provident fund, PPF, insurance and home loan interest. Compare both with your own numbers.
The new regime is the default. Since the Finance Act, 2025 raised the rebate so that taxable income up to Rs 12 lakh carries no tax, the new regime gives lower tax for most people with moderate deductions.
When the old regime can still win
The old regime can work out better if you have large deductions and exemptions, for example a big HRA exemption because you pay high rent, the full investment deduction, health insurance for parents and interest on a home loan. The higher your claims, the more the old regime’s higher rates are offset.
Switching rules
Salaried people without business income can generally choose the regime each year when filing. People with business or professional income face stricter rules on moving between regimes, so check before you switch.
The quickest way to decide is to compare. Our income tax calculator shows both regimes side by side with the working.
Official sources
- Income Tax Department, Income Tax Department
- Income Tax e-filing portal, Income Tax Department
FinanceOpen is independent and is not affiliated with these bodies. Links open official websites in a new tab.
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