Direct Answer / Key TakeawayUnder the New Tax Regime (Section 115BAC), tax slabs are significantly lower with standard deduction of ₹75,000, and income up to ₹7.75 Lakhs is effectively tax-free. However, traditional deductions (Section 80C, 80D, HRA, home loan interest) are foregone. As a rule of thumb: If your total eligible deductions exceed ₹3.75 Lakhs to ₹4.25 Lakhs, the Old Tax Regime is better; otherwise, the New Tax Regime saves more tax and simplifies financial life.
The Core Difference Between the Two Regimes
- New Tax Regime (Default): Concessional tax slabs with zero paperwork. You do not need to lock money into tax-saving schemes (ELSS, insurance, PPF) just to save tax.
- Old Tax Regime: Higher slab rates, but allows claiming deductions under Chapter VI-A:
- Section 80C: Up to ₹1.5 Lakhs (EPF, PPF, ELSS, Life Insurance).
- Section 80D: Up to ₹25,000 - ₹50,000 (Health insurance premiums).
- HRA (House Rent Allowance): Actual rent paid exemption.
- Section 24(b): Up to ₹2 Lakhs interest on self-occupied home loan.
- Section 80CCD(1B): Up to ₹50,000 for NPS contributions.
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The Breakeven Deduction Threshold
To determine which regime is better for your salary:
- Income ₹10 Lakhs: Breakeven deduction is ~₹2.50 Lakhs.
- Income ₹15 Lakhs: Breakeven deduction is ~₹3.75 Lakhs.
- Income ₹20 Lakhs+: Breakeven deduction is ~₹4.25 Lakhs.
If your actual legitimate deductions (HRA + 80C + 80D + Home Loan Interest) exceed this threshold, opt for Old Regime. Otherwise, select New Regime.
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Why the New Regime Liberates Your Investment Choices
Under the Old Regime, millions of Indian investors bought poor-yielding ULIPs, traditional LIC policies, and 5-year lock-in products solely to exhaust Section 80C.
Under the New Regime:
- You invest purely based on asset merit (Low-cost index funds and direct flexi-cap funds).
- Zero lock-in restrictions.
- Zero stress of collecting rent receipts and submitting declaration forms in January.A salaried professional earning ₹15 Lakhs gross with ₹1.5L 80C, ₹25k 80D, and ₹1.5L HRA (Total deductions = ₹3.25 Lakhs).
Old Regime Tax = ₹1,56,000. New Regime Tax = ₹1,35,200. The New Regime saves ₹20,800 in cash without needing extra declarations.
💡 Takeaway: Unless you have a substantial home loan interest deduction alongside HRA, the New Regime is typically more rewarding.