Quick answer: There is no universal deduction threshold at which the old regime becomes cheaper; compare both for your income and tax year. Below that, the new regime almost always leaves more in your hand because its slabs are wider and it carries a higher standard deduction and rebate. Most salaried people without a home loan are better off under the new regime. You can switch each year if you have only salary income; business income makes the choice much harder to reverse.
The core difference
The old regime has higher tax rates but lets you subtract a long list of deductions: 80C investments, HRA, home loan interest, health insurance, NPS, education loan interest and more. The new regime has lower rates and wider slabs, but removes nearly all of those deductions. It is a trade between rate and relief.
Which deductions survive under the new regime
| Deduction | Old regime | New regime |
|---|---|---|
| Standard deduction (salaried) | Available | Available, at a higher amount |
| Employer NPS contribution, 80CCD(2) | Available | Available |
| 80C (PPF, ELSS, LIC, home loan principal) | Available | Not available |
| 80D (health insurance premium) | Available | Not available |
| HRA exemption | Available | Not available |
| Home loan interest, self-occupied, Section 24(b) | Available | Not available |
| 80CCD(1B), extra ₹50,000 NPS | Available | Not available |
| 80TTA / 80TTB (interest income) | Available | Not available |
| Leave travel allowance | Available | Not available |
| Home loan interest on let-out property | Available | Available, with conditions |
Two things worth noting: the employer NPS contribution under 80CCD(2) survives in both regimes, which makes it the most tax-efficient component of a salary package. And home loan interest is only lost for a self-occupied property, not a rented-out one.
The rough break-even
The arithmetic changes with each Budget, but the principle holds: add up everything you would claim under the old regime, and compare it against the break-even threshold for your income level.
| Your situation | Typical total deductions | Usually better |
|---|---|---|
| Young, renting, no investments beyond EPF | ₹1–2 lakh | New regime |
| Salaried, EPF plus some 80C, health insurance | ₹2–3 lakh | New regime, usually |
| Paying HRA in a metro plus full 80C | ₹3.5–5 lakh | Depends; calculate both |
| Home loan on self-occupied property plus 80C plus 80D | ₹5 lakh+ | Old regime, usually |
| Home loan plus HRA plus NPS plus insurance | ₹6 lakh+ | Old regime, clearly |
| Business income with few deductions | Varies | New regime, and note the switching restriction |
The home loan is usually the deciding factor. Interest on a self-occupied home is often the single largest deduction a salaried person has, and losing it under the new regime is what tips most homeowners back to the old one.
How to decide, properly
- List your actual deductions, not the ones you intend to make. EPF contribution, insurance premiums already paid, rent actually paid, home loan interest from the lender certificate.
- Use the official calculator on the income tax portal, which is updated for the current year’s slabs. Do not rely on a blog’s numbers, including ours, since slabs change with each Budget.
- Run both regimes with the same figures and compare the final tax, not the taxable income.
- Factor in what you would stop doing. If you only invest in ELSS for the deduction, moving to the new regime frees that money for better-suited investments.
- Repeat the exercise every year, especially after a salary change, a new home loan, or a Budget.
The switching rules
- Salaried with no business income: you may choose afresh each financial year while filing your return, regardless of what you told your employer for TDS purposes.
- With business or professional income: the choice is far more restricted. Moving out of the new regime and back is generally allowed only once, so this is close to a permanent decision.
- Your employer declaration is for TDS only. If you picked the wrong one for TDS, you can still choose the other while filing; the difference comes back as a refund or is paid as additional tax.
A point people miss
The new regime is the default. If you do nothing, you are taxed under it. Choosing the old regime requires an active election, and for those with business income it requires filing a specific form before the return due date. Missing that step means losing the old regime for that year even if it would have been better.
If you have side income beyond salary, check whether you owe advance tax as well, since the regime choice affects the amount.
Frequently asked questions
Which regime is better for a ₹12 lakh salary?
It depends entirely on deductions. With only EPF and standard deduction, the new regime is usually better. For an eligible resident with only ordinary salary income of ₹12 lakh, the new-regime rebate can reduce tax to nil; deductions do not make the old regime cheaper than nil tax. Run both in the official calculator.
Can I change my mind after filing?
You can choose the regime while filing the original return. Changing it in a revised return is restricted, and not possible at all in a belated return for many taxpayers, so decide before you file.
Does the new regime mean I should stop investing in PPF or ELSS?
Not necessarily. It means the tax deduction is no longer a reason to. Judge those investments on their own merits, since PPF remains tax-free at maturity in both regimes. See our comparison of PPF vs NPS.
What about senior citizens?
Seniors often have interest income and health insurance premiums, both of which are deductible only under the old regime, so the old regime frequently works better for them. Calculate both.
Last updated September 2026. Slab rates, deduction limits and switching rules are set by the Finance Act and change with each Budget; verify current provisions on incometax.gov.in or with a qualified tax professional. General information, not tax advice.
Sources
Checked against: Income Tax Department — guidance for salaried individuals. Rules, fees and rates change — check the official page before you act on anything here.
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