Tax3 min read · Updated 21 October 2026
Old vs new tax regime: which saves you more tax?
How to choose between the old and new tax regime for FY 2026-27, with two worked salary examples and the deductions you need for the old regime to win.
The rule of thumb
The new regime has lower rates and a ₹75,000 standard deduction, but almost no deductions. The old regime has higher rates and a ₹50,000 standard deduction, but lets you deduct HRA, 80C (up to ₹1.5 lakh), 80D, own NPS (₹50,000) and home loan interest (up to ₹2 lakh). The more you can deduct, the better the old regime looks.
Example 1: ₹18 lakh salary
Basic ₹7.2 lakh, HRA ₹2.88 lakh, rent ₹3 lakh, 80C ₹1.5 lakh, 80D ₹25,000, NPS ₹50,000. HRA exemption is ₹2,28,000; total deductions ₹4,53,000. Old regime tax: ₹2,09,664. New regime tax: ₹1,50,800. New wins by ₹58,864. The old regime would need about ₹6,45,000 of deductions to catch up.
Example 2: ₹10 lakh salary
Basic ₹4 lakh, HRA ₹1.6 lakh, rent ₹2.4 lakh, 80C ₹1.5 lakh, 80D ₹25,000, NPS ₹50,000 and home loan interest ₹2 lakh. Old regime tax: ₹0. New regime tax: ₹0. The same regime wins.
How HRA is exempt
HRA exemption is the lowest of: the HRA you receive, rent paid minus 10% of basic, and 50% of basic (40% outside the four big cities). In example 1 it is ₹2,28,000.
Common questions
Which regime is better for me?
Add your deductions. If they are large, the old regime may win. Otherwise the new regime usually does.
Can I switch every year?
Salaried people can choose each year. Business income has stricter rules.
Does the new regime allow HRA?
No. HRA, 80C and 80D are not available in the new regime.