Which Income Tax Regime Is Better – Old vs. New Regime Comparison 2026

The regime question sounds complicated but reduces to one practical test: are your total old-regime deductions large enough to make your tax liability under the old regime lower than under the new regime's inherently lower slab rates? For most salaried employees below Rs. 15 lakh income, the new regime is often better — for higher earners with home loans and significant investments, the old regime may still win.

This page covers:

• What the old and new tax regimes are
• Tax slabs under both regimes for FY 2025-26
• Key deductions available under each regime
• Who benefits from the old regime vs new regime
• Worked examples showing regime comparison
• The home loan factor — how it tips the balance
• How to decide — the practical test
• Can you switch between regimes?

India's income tax system now offers two parallel regimes for individual taxpayers:

• Old regime: The traditional tax framework with higher slabs but the full set of exemptions and deductions — HRA, LTA, standard deduction of Rs. 50,000, Section 80C (up to Rs. 1.5 lakh), Section 80D, Section 24(b) home loan interest, and many others.
• New regime (default from FY 2023-24): Lower tax slabs with minimal deductions. The standard deduction is Rs. 75,000. Section 87A rebate makes income up to Rs. 12 lakh effectively tax-free. Most other deductions from the old regime are not available.

New tax regime (default)

Standard deduction of Rs. 75,000 and Section 87A rebate up to Rs. 60,000 effectively make taxable income up to Rs. 12 lakh tax-free.

Old tax regime

Standard deduction Rs. 50,000; full deductions under 80C, 80D, 24(b), HRA, etc. available.

New regime typically better when

• Total income is below Rs. 12 lakh (effectively zero tax under new regime)
• Total old-regime deductions are less than approximately Rs. 3.75 lakh for income around Rs. 15 lakh
• You do not have a large home loan, significant 80C investments, or HRA
   

Old regime typically better when

• You have a significant home loan (interest above Rs. 1.5 lakh per year)
• Your Section 80C investments are consistently at Rs. 1.5 lakh
• You have substantial HRA exemption claims
• You contribute to NPS and claim the additional Rs. 50,000 under 80CCD(1B)
• Total deductions are large enough to compensate for the old regime's higher base rates

Example 1: Salary Rs. 10 lakh, modest deductions

New regime wins by approximately Rs. 60,000 in this scenario.

Example 2: Salary Rs. 15 lakh, home loan + full deductions

Old regime wins by approximately Rs. 61,250 in this scenario — the home loan makes the difference.

Section 24(b)'s Rs. 2 lakh interest deduction under the old regime is one of the most valuable deductions available — and it is not available under the new regime. For anyone with a home loan where annual interest payments exceed Rs. 1.5 lakh, this single deduction often makes the old regime the better choice when combined with standard Section 80C investments.

The exact breakeven depends on income level. As a rough rule of thumb: if you have a home loan with interest above Rs. 1.5 lakh/year, full Rs. 1.5 lakh in 80C, and some health insurance premium, and your salary is above Rs. 12-15 lakh, the old regime is likely better. Below Rs. 10-12 lakh income with modest deductions, the new regime is likely better.

Use the Income Tax Department's online tax calculator at incometax.gov.in to calculate your specific liability under both regimes before your employer's investment declaration deadline.

• Salaried employees: Can switch between old and new regime every financial year, declaring their choice to their employer before the investment declaration deadline. The employer deducts TDS based on the selected regime.
• Self-employed individuals and those with business income: Can switch only once — from new to old regime — and cannot switch back. This makes the choice significantly more consequential for the self-employed.

The regime choice is worth calculating annually, particularly as your income grows and your home loan interest payments evolve. Bajaj Finance offers home loans from 7.25% p.a.* with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check your eligibility today.