For years, the debate between old and new tax regimes was finely balanced. A few 80C investments, health insurance, and suddenly the old regime looked better.
Not anymore. With the latest changes in slabs and rebate, the new regime has pulled decisively ahead. For the average taxpayer, the gap is no longer small. The government has made its preference obvious — simplify and nudge everyone toward the new regime.
The numbers
Under the old regime, the rebate shields income only up to ₹5 lakh. In the new regime, it stretches all the way to ₹12 lakh. Add the higher standard deduction of ₹75,000, and a salaried individual can walk away tax-free up to ₹12.75 lakh.
Now, the deductions required to make the old regime work are unrealistically high. Here’s a table that shows how much in deductions (breakeven amount) you need at different income levels for the old regime to even match the new.
How to use this table?
- If your total deductions > break-even → the old regime wins.
- If your total deductions < break-even → the new regime is better.
A few things to keep in mind:
- The breakeven figures exclude the ₹50,000 standard deduction under the old regime.
- For tax calculation under both regimes, we’ve already accounted for the standard deduction: ₹75,000 in new, ₹50,000 in old.
- If you don’t have salary income (and therefore no standard deduction), your numbers will change.
What’s my take?
In my opinion, old regime is dead (for most of us). Think of a taxpayer earning ₹12 lakh, they would need ₹6.5 lakh in deductions just to keep pace with the new regime. That’s a tall ask.
Only taxpayers with large HRA + home loan interest or education loan interest might tip the scales. But that’s a narrow slice of taxpayers, maybe under 10%.
And then a handful deductions still survive under the new regime like employer NPS contributions and interest on let-out property loans. These should still be factored into your maths.
There’s another cost to the old regime. The government is tightening disclosures for every deduction you claim. More details, more proofs, more hassle. So if the savings are marginal, I’d ask is it worth the time and peace of mind.
If you earn from business or profession and plan to switch regimes, filing Form 10-IEA is mandatory.
To conclude, the old regime isn’t dead by law. But for most taxpayers, it’s dead in practice. Unless your deductions comfortably cross past the break-even line, sticking with the new regime isn’t just better, it’s common sense.