What each regime allows
| Benefit | New regime | Old regime |
|---|---|---|
| Standard deduction (salary) | ₹75,000 | ₹50,000 |
| Section 87A rebate | Up to ₹60,000 (income ≤ ₹12L) | Up to ₹12,500 (income ≤ ₹5L) |
| HRA, LTA | No | Yes |
| 80C, 80D, 80CCD(1B) | No | Yes |
| Home-loan interest (self-occupied) | No | Up to ₹2 lakh |
| Employer NPS (80CCD(2)) | Yes, up to 14% | Yes, up to 10% |
| Maximum surcharge | 25% | 37% |
Switching rules
- Salaried and others without business income: choose afresh every year when filing
- With business or professional income: opting out of the new regime needs a declaration before the due date, and you can come back to the new regime only once
- Tell your employer at the start of the year so TDS is right; the final choice is made in the ITR
Worked example: ₹20 lakh salary with big deductions
- 1New regime: ₹20,00,000 − ₹75,000 = ₹19,25,000 taxable; tax ≈ ₹1,85,000 + cess.
- 2Old regime deductions: standard ₹50,000, HRA ₹2,40,000, 80C ₹1,50,000, 80D ₹25,000, NPS ₹50,000, home-loan interest ₹2,00,000 = ₹7,15,000.
- 3Old regime taxable ₹12,85,000; tax = ₹12,500 + ₹1,00,000 + ₹85,500 = ₹1,98,000 + cess.
- 4Break-even: the old regime wins only with deductions above about ₹7.6 lakh at this salary.
Even with ₹7.15 lakh of deductions, the new regime is cheaper here by about ₹13,000.
