New vs Old Tax Regime: How to Decide

Step 1: List the deductions you can really claim

• 80C: EPF, PPF, ELSS, life insurance premium, principal on a home loan, children's tuition — capped at ₹1,50,000.
• 80D: health insurance premium for self and parents.
• Home-loan interest on a self-occupied house.
• HRA, if you pay rent and it is part of your salary.
• 80CCD(1B): an additional NPS deduction.

Step 2: Compute tax both ways

Use the income tax calculator twice — once with the new regime, once with the old regime and your total deductions entered. Compare the total tax, including cess.

Step 3: Apply the rule of thumb

1. Few or no deductions: the new regime almost always wins because of its lower slab rates and ₹75,000 standard deduction.
2. Large deductions (roughly ₹3,50,000 or more, depending on income): the old regime often wins.
3. In between: the two are close — run the exact numbers.

Why the threshold moves

The more you earn, the higher the marginal rate the old regime's deductions offset, so the deduction amount needed to break even changes with income. There is no single magic number — that is why you compare directly.

Other things to remember

• Salaried taxpayers can switch regimes every year; business income cannot switch freely.
• Tell your employer your choice early so TDS is correct, but you can still change it when filing.
• Keep documentary proof for every old-regime deduction you claim.