A Final Guide to Making the Right Choice
The Income Tax regime in India offers two choices: the Old Regime with deductions and exemptions, and the New Regime with lower tax rates but limited deductions. From FY 2023–24 onward, the Government has made the New Regime the default.
If you’re a salaried employee, this guide is structured to help you decide with clarity.
1. What is the Key Difference?
| Feature | Old Regime | New Regime |
|---|---|---|
| Tax Slabs | Higher rates | Lower rates |
| Deductions allowed? | Yes (80C, 80D, HRA, etc.) | Limited (Only standard deduction and NPS employer contribution) |
| Compliance burden | Higher (investment proofs, etc.) | Lower (no proofs required) |
| Default Regime | No | Yes |
2. What is the Breakeven Point?
The breakeven point is the minimum amount of deductions/exemptions you must claim in the old regime for it to be more beneficial than the new regime.
| Annual Salary (in ₹ lakh) | Approx. Breakeven Deductions (in ₹ lakh) |
|---|---|
| 7 | 0.00 (New regime gives full rebate) |
| 10 | 2.50 |
| 15 | 3.75 |
| 20 | 5.00 |
| 30 | 6.50 |
| 40 | 8.00 |
| 50 | 8.00+ |
Example:
If your annual income is ₹20 lakh and you claim less than ₹5 lakh in deductions (80C, 80D, HRA, home loan interest, etc.), the new regime will give you lower tax.
If you can claim more than ₹5 lakh in deductions, old regime will save more tax.
3. Who Should Choose Which Regime?
You Should Choose the New Regime If:
- Your income is below ₹7 lakh — you will pay zero tax due to the rebate under Section 87A.
- Your total deductions (80C, 80D, HRA, etc.) are below the breakeven for your salary level.
- You want a simplified filing experience with no documentation burden.
- Your income is high but you don’t claim significant deductions.
You Should Choose the Old Regime If:
- You claim high deductions through home loans, investments, medical insurance, etc.
- You live in rented accommodation and claim HRA exemption.
- You prefer to save tax through structured investments and planning.
4. What Deductions Are Allowed in the New Regime?
Contrary to earlier versions, the New Regime now allows:
- Standard Deduction of ₹50,000 for salaried individuals
- Employer’s contribution to NPS under Section 80CCD(2)
No other deductions (like 80C, 80D, HRA, LTA, home loan interest, etc.) are allowed.
5. Final Verdict
The New Regime is better if:
- You are earning under ₹7 lakh
- Your deductions are less than ₹2.5–₹3 lakh (for ₹10–15 lakh salary)
- You want minimal compliance
The Old Regime is better if:
- You claim more than ₹3–5 lakh in deductions
- You have housing loans, rent, investments, insurance, etc.
Conclusion
Choosing the right tax regime should be based on your actual numbers — not assumptions.
At Stox n Tax, we help you run both calculations to make a final, data-backed decision.
If your deductions are less than the breakeven, choose New Regime.
If they are more, go with Old Regime.
Once this is done, your decision is clear — and final.
Still confused – use this tracker –
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