When does the Old Tax Regime beat the New Tax Regime?

The Old Tax Regime only saves tax if your aggregate deductions (Standard Deduction ₹50,000 + 80C + 80D health insurance + HRA + home loan interest) exceed roughly ₹3.75 Lakhs to ₹4.25 Lakhs per year.

What is Section 87A marginal relief under the New Regime?

Marginal relief ensures that taxpayers earning slightly above ₹7,00,000 are not taxed more than the incremental income earned above the ₹7,00,000 threshold.

Tax & SalaryBudget 2024

Income Tax (Old vs New)

Q: Is income up to ₹7.75 Lakhs completely tax-free under the New Tax Regime?

Yes. Salaried taxpayers receive a ₹75,000 standard deduction under Section 16(ia), bringing taxable income to ₹7,00,000. Under Section 87A, taxable income up to ₹7,00,000 receives a full rebate, resulting in ₹0 net tax.

Q: Can salaried employees switch regimes every year?

Yes. Salaried employees without business or professional income can freely choose between the Old and New Tax Regimes every year when filing their ITR under Section 139(1).

Compare tax liability and monthly in-hand salary between Old and New Tax Regimes under latest Union Budget slabs.

Runs entirely in your browser
No sign-up, nothing stored
Formula explained below

Your income

Slabs for FY 2024–25 & FY 2025–26. Deductions only affect the old regime.

Annual gross salary / CTC

₹

₹3L₹50L

Other income

₹

Interest, rent or any other taxable income. Added to your salary.

Old regime deductions

Only applies to the old regime.

Section 80C (PPF, EPF, ELSS, insurance)Max ₹1.5L

₹

Section 80D (health insurance premium)Max ₹75K

₹

HRA exemption (house rent allowance)Rent paid

₹

Not sure? Work it out with the HRA calculator.

NPS (Section 80CCD(1B))Max ₹50K

₹

Home loan interest (Section 24b)Max ₹2L

₹

Standard deduction is applied automatically: ₹75,000 in the new regime and ₹50,000 in the old regime.

Recommended for youSaves ₹26,000

New regime

The new regime saves you ₹26,000 in tax on an income of ₹15,00,000.

Tax · new regime

₹1,30,000

Tax · old regime

₹1,56,000

Monthly take-home

₹1,14,167

Total tax under each regime

Including the 87A rebate and 4% health & education cess.

The old regime needs about ₹4,58,332 of deductions to break even

At an income of ₹15,00,000 you claim ₹3,75,000 (including the ₹50,000 standard deduction), so you would need roughly ₹83,332 more before the old regime costs the same as the new one.

New regime

Lower slab rates, ₹75,000 standard deduction only

Recommended

Gross income: ₹15,00,000
Standard deduction: −₹75,000
Taxable income: ₹14,25,000
Tax on slabs: ₹1,25,000
Rebate u/s 87ANo tax on taxable income up to ₹7,00,000: ₹0
Cess (4%): ₹5,000
Total tax: ₹1,30,000
Monthly take-home: ₹1,14,167

Old regime

Higher rates, but deductions are allowed

Gross income: ₹15,00,000
Total deductionsStandard ₹50,000 · 80C ₹1,50,000 · 80D ₹25,000 · HRA ₹1,00,000 · NPS ₹50,000 · Home loan ₹0: −₹3,75,000
Taxable income: ₹11,25,000
Tax on slabs: ₹1,50,000
Rebate u/s 87ANo tax on taxable income up to ₹5,00,000: ₹0
Cess (4%): ₹6,000
Total tax: ₹1,56,000
Monthly take-home: ₹1,12,000

From gross income to take-home · new regime

Deductions lower the income that is taxed but stay in your pocket, so take-home is gross income minus tax.

Tax at different incomes

Total tax from ₹3L to ₹50L; your income is ₹15L. The old regime keeps your current deductions of ₹3,75,000.

New regime
Old regime

New Regime Tax Slabs (FY 2024–25 & FY 2025–26)

Your taxable income of ₹14,25,000 reaches the highlighted slab.

Up to ₹3,00,000: Nil (0%)
₹3,00,001 – ₹7,00,000: 5% (Rebate up to ₹7L)
₹7,00,001 – ₹10,00,000: 10%
₹10,00,001 – ₹12,00,000: 15%
₹12,00,001 – ₹15,00,000Your top slab: 20%
Above ₹15,00,000: 30%

Old regime tax slabs

Your taxable income of ₹11,25,000 reaches the highlighted slab.

Up to ₹2,50,000: Nil (0%)
₹2,50,001 – ₹5,00,000: 5% (Rebate up to ₹5L)
₹5,00,001 – ₹10,00,000: 20%
Above ₹10,00,000Your top slab: 30%

Comprehensive Comparison: New Tax Regime (Section 115BAC) vs. Old Tax Regime

The revised New Tax Regime is the statutory default for individuals, HUFs, and AOPs. It features concessional tax slabs and an increased ₹75,000 standard deduction for salaried individuals, but disallows itemised deductions like Section 80C, 80D, and HRA. The Old Regime retains higher slab rates but allows full deduction claims.

Net Tax Liability = [ (Gross Slab Tax − Section 87A Rebate) + Surcharge ] × 1.04

Gross Slab Tax: Progressive tax calculated across applicable income brackets
Section 87A Rebate: 100% tax rebate up to ₹7,00,000 taxable income (New) or ₹5,00,000 (Old)
Surcharge: Levied on taxable incomes exceeding ₹50 Lakhs (capped at 25% under New Regime)
1.04 (4% Cess): Mandatory 4% Health & Education Cess on total income tax + surcharge

Income Tax Slabs for Individual Taxpayers (FY 2024–25 & FY 2025–26)

Taxable Income Slab	New Regime (Sec 115BAC) Rate	Old Regime Rate
₹0 to ₹3,00,000	NIL	NIL (up to ₹2.5L)
₹3,00,001 to ₹7,00,000	5% (Tax-free with 87A)	5% (₹2.5L to ₹5L) / 20% (>₹5L)
₹7,00,001 to ₹10,00,000	10%	20%
₹10,00,001 to ₹12,00,000	15%	30%
₹12,00,001 to ₹15,00,000	20%	30%
Above ₹15,00,000	30%	30%

*Note: Salaried individuals under the New Tax Regime receive a flat Standard Deduction of ₹75,000. When combined with the Section 87A rebate, any salaried employee earning up to ₹7,75,000 pays zero income tax.

The Deduction Break-Even Threshold

The choice between regimes boils down to a mathematical break-even point. If your eligible deductions under the Old Regime exceed the threshold, the Old Regime saves you money; otherwise, the New Regime is superior:

Gross Income: ₹10 Lakhs

Break-even Deductions:

₹2.50 Lakhs

If Old Regime deductions exceed ₹2.5L (e.g. 80C + 80D), Old Regime wins.

Gross Income: ₹15 Lakhs

Break-even Deductions:

₹3.58 Lakhs

Requires high HRA exemption or home loan interest to beat New Regime.

Gross Income: ₹25 Lakhs

Break-even Deductions:

₹4.25 Lakhs

New Regime almost universally saves tax for higher income earners.

Section 87A Marginal Relief

What happens if your taxable income under the New Regime is ₹7,05,000 (just ₹5,000 above the ₹7 Lakh rebate limit)? Without relief, earning ₹5,000 extra would cost you ₹25,500 in tax!

To prevent this punitive spike, Section 87A incorporates Marginal Relief: the tax payable on income slightly exceeding ₹7,00,000 cannot exceed the incremental income earned above ₹7,00,000. Our calculator automatically applies marginal relief computations.

Frequently Asked Questions

Is salary up to ₹7.75 Lakhs completely tax-free under the New Tax Regime?

Yes. Salaried employees and pensioners receive a flat standard deduction of ₹75,000 under Section 16(ia). This reduces a ₹7,75,000 gross salary to a net taxable income of ₹7,00,000. Under Section 87A, any resident individual with taxable income up to ₹7,00,000 receives a full rebate of up to ₹25,000, bringing final tax liability to exactly ₹0.

Can I switch between the Old and New Tax Regimes every year?

Salaried taxpayers and pensioners without business or professional income can freely choose between the Old and New Tax Regimes every financial year when filing their Income Tax Return (ITR-1 or ITR-2) under Section 139(1). However, individuals with business or professional income (ITR-3 or ITR-4) can opt out of the New Regime only once in their lifetime.

What deductions are still allowed under the New Tax Regime?

While Section 80C, 80D, 80TTA, and HRA are disallowed, the New Tax Regime permits: (1) Standard deduction of ₹75,000 for salaried employees, (2) Employer NPS contribution under Section 80CCD(2) up to 14% of basic salary for government and corporate employees, (3) Transport allowance for specially-abled individuals, and (4) Gratuity and leave encashment exemptions.

How does employer NPS contribution under Section 80CCD(2) work?

Employer contributions to your National Pension System (NPS) account up to 14% of (Basic Salary + DA) for Central/State Government employees, or up to 10% (14% under proposed reforms) for private corporate employees, are deductible under Section 80CCD(2) under BOTH the Old and New Tax Regimes without any upper monetary ceiling.

What is the surcharge rate for high-net-worth individuals under the New Regime?

Under the New Tax Regime, the highest surcharge rate on taxable income above ₹5 Crores was reduced from 37% to 25%. This lowers the maximum effective tax rate for ultra-high-net-worth individuals from 42.744% to 39.0%, making the New Regime overwhelmingly attractive for individuals earning above ₹5 Crores.

How does the Health & Education Cess work?

A statutory 4% Health and Education Cess is levied on the aggregate of total income tax plus surcharge across all taxpayers. The cess is calculated after applying Section 87A rebates and marginal relief.

What if I fail to select a tax regime with my employer?

Under Section 115BAC, the New Tax Regime is the default regime. If you do not submit a formal regime declaration to your company's payroll department, TDS on salary will automatically be deducted under the New Tax Regime. You can still switch to the Old Regime when filing your ITR.

Are capital gains on stocks and mutual funds taxed under these slab rates?

No. Special rate incomes like Long-Term Capital Gains (LTCG under Section 112A at 12.5%) and Short-Term Capital Gains (STCG under Section 111A at 20%) are taxed at their dedicated statutory rates, rather than normal progressive slab rates, regardless of whether you choose the Old or New Regime.

Keep planning

All 21 calculators

In-Hand Salary (CTC)

Convert your annual CTC into actual monthly take-home salary after EPF, gratuity, and income tax deductions.

Gratuity Calculator

Calculate statutory gratuity payout under the Payment of Gratuity Act 1972 and check tax-exempt eligibility.

HRA Exemption Calculator

Calculate tax-exempt House Rent Allowance (HRA) under Section 10(13A) Rule 2A for metro and non-metro cities.

SIP Calculator

Calculate expected returns on your monthly Systematic Investment Plan (SIP) in mutual funds.