Which is Better Old or New Tax Regime?

Wondering which is better: old or new tax regime? The old regime offers multiple tax deductions and exemptions like 80C, HRA, and home loan interest, while the new regime provides simpler slabs with lower rates. 

This guide will help you quickly compare both regimes and choose the one that maximizes your tax savings.

Let’s Understand the Two Tax Regimes

• Old Tax Regime: Allows multiple deductions and exemptions, such as 80C investments, HRA, and home loan interest. Tax is calculated after claiming these deductions.
• New Tax Regime: Offers lower tax slab rates but most deductions and exemptions are removed. It’s simpler but may not be ideal if you claim large deductions.

Comparison Based on Your Income and Deductions

1. New regime may be better if:

• Your total deductions are minimal.
• You prefer simplicity and less paperwork.
• Your income is moderate (up to ₹12–15 lakh per year).

2. Old regime may be better if:

• You claim large deductions (80C, HRA, home loan interest).
• Your income is higher (₹20 lakh+ per year).
• You want to continue tax-saving investments while reducing taxable income.

Quick Calculation Checklist

1. Estimate your gross annual income.
2. Add all eligible deductions under the old regime.
3. Compare your tax liability under both regimes:
   • If deductions are small → New regime likely saves more tax.
   • If deductions are large → Old regime may save more.
4. Decide based on take-home pay rather than just slab rates.

How to Switch Between Regimes?

1. Salaried employees: You can choose the regime at the beginning of the financial year via Form 12BB submitted to your employer.
2. Self-employed / freelancers: While filing your ITR, you can select your preferred regime for that year.

• Remember: You can change the regime annually, so it’s not a permanent choice.

Key Things to Keep in Mind

• The new regime is simpler and better for moderate incomes with minimal deductions.
• The old regime works best if you actively claim multiple deductions or exemptions.
• Always calculate both options before finalizing.

Conclusion

There’s no one-size-fits-all answer. The new tax regime is ideal for simplicity, while the old regime rewards those with higher income and multiple deductions. Compare both carefully and pick the one that maximizes your take-home salary.