Old or New Tax Regime? The One Number That Decides It

Every February the same argument restarts, and it is almost always conducted with rules of thumb instead of arithmetic. There is a precise answer, and it is one number.

Your break-even deduction

This is the total deductions at which both regimes charge identical tax. Below it, the new regime wins. Above it, the old regime does. Nothing else matters.

At a ₹15,00,000 salary, the break-even is ₹5,43,750.

	New regime	Old regime (₹2,00,000 deductions)
Gross salary	₹15,00,000	₹15,00,000
Standard deduction	−₹75,000	−₹50,000
Other deductions	—	−₹2,00,000
Taxable income	₹14,25,000	₹12,50,000
Tax including cess	₹97,500	₹1,95,000

The old regime charges exactly twice as much while taxing ₹1,75,000 less income. Its rates are simply higher: 30% starts at ₹10,00,000 in the old regime and at ₹24,00,000 in the new one.

Why most people fall short

Here is what the old regime actually offers, at realistic maximums:

Deduction	Maximum
80C (shared with EPF, tuition, insurance, home loan principal)	₹1,50,000
80D health insurance (self)	₹25,000
80D (senior citizen parents)	₹50,000
80CCD(1B) — extra NPS	₹50,000
Section 24(b) — home loan interest, self-occupied	₹2,00,000
HRA exemption	no fixed cap
Standard deduction	₹50,000 — but the new regime gives ₹75,000

Without a home loan and without a large metro rent, most salaried people land between ₹1,50,000 and ₹2,50,000. That is less than half the break-even.

Note also that the standard deduction is a net loss of ₹25,000 when you move to the old regime, which people forget to count.

Where the old regime genuinely wins

Take someone renting in Mumbai on ₹45,000 a month with a home loan on a property elsewhere:

• 80C, full: ₹1,50,000
• Section 24(b): ₹2,00,000
• HRA exemption: ₹3,00,000
• 80D for self and parents: ₹75,000

That is ₹7,25,000 — comfortably past break-even. For this profile the old regime is clearly better, and it is not close.

The profile matters more than the salary. Someone earning ₹30 lakh with no home loan and no rent will still do better on the new regime.

Income up to ₹12.75 lakh is genuinely tax-free

Under the new regime, a salaried person pays nothing on income up to ₹12,75,000. The ₹75,000 standard deduction brings taxable income to ₹12,00,000, and the Section 87A rebate cancels the ₹60,000 of tax that would apply.

One rupee more and the rebate disappears entirely, so tax jumps sharply just past the threshold. If your salary sits near ₹12.75 lakh, a small increase can cost you more than it pays — worth knowing before negotiating a raise of a few thousand rupees.

The one deduction that survives

Almost everything disappears in the new regime, with one exception worth real money: Section 80CCD(2), the deduction for your employer's contribution to your NPS, up to 14% of salary.

If your employer offers NPS in the salary structure, routing part of your CTC through it produces a deduction that works on the new regime where nothing else does. It is one of very few remaining levers and it is badly underused. Ask HR whether the option exists — many companies offer it and never mention it.

Switching

If your income is only from salary, you may choose afresh each year, and you can even pick a different regime at filing from the one you declared to your employer. Declaring the new regime in April and switching to the old at filing is perfectly allowed.

If you have business or professional income, the choice is far more restricted — you can generally opt out of the new regime only once, and going back closes the door again.

Do this instead of reading another opinion

Add up what you genuinely claim — not what you could theoretically claim. Then put your salary into the old vs new regime calculator, which computes your exact break-even and shows a table of how the answer changes with deductions.

If your real total is below the break-even, the argument is over.