New vs Old Tax Regime: Which One Really Saves More Tax on Your Salary?

Balasahana Suresh
Choosing between the New Tax Regime and the Old Tax Regime can feel like picking between simplicity and savings. One promises fewer headaches, the other promises lower tax — but only if you plan smartly.

Let’s break it down point by point so you can decide which regime puts more money in your pocket 💸

🔍 1. Two Tax Regimes, One Confusing Choice

The government now offers two parallel tax systems:

  • Old Tax Regime – higher tax rates, but generous deductions
  • New Tax Regime – lower tax rates, but most deductions are gone
By default, salaried employees are placed under the New Tax Regime, unless they actively opt for the old one.

🧾 2. Old Tax Regime: The king of Deductions

If you’re someone who invests and plans taxes carefully, the Old Regime still packs a punch.

What makes it powerful?

You can claim popular deductions like:

  • ₹1.5 lakh under Section 80C (PF, ELSS, LIC, PPF)
  • House Rent Allowance (HRA)
  • Home loan interest (Section 24)
  • Health insurance (Section 80D)
  • Standard deduction on salary
👉 Best for:
Employees with home loans, insurance, rent payments, and long-term investments.

⚡ 3. New Tax Regime: Simple, Clean & No Paperwork

The New Tax Regime is designed for people who want zero tax-planning stress.

Why people like it:

  • Lower tax slabs
  • No need to track investments
  • No proofs, no forms, no last-minute panic
You still get:

  • Standard deduction on salary
  • Employer’s contribution to NPS (limited benefit)
👉 Best for:
Young professionals, first-jobbers, and those who don’t invest much.

🧮 4. Salary Below ₹7–8 Lakh? New Regime Wins 🏆

If your annual salary is in the lower or mid range and you don’t claim many deductions, the New Regime often results in:

  • Lower or even zero tax
  • Faster take-home pay
  • Less compliance hassle
💡 Thanks to rebates, many taxpayers in this bracket pay no tax at all under the New Regime.

🏠 5. Paying Rent or EMIs? Old Regime Shines

Once your salary climbs higher — especially if you:

  • Pay house rent
  • Have a home loan
  • Invest regularly under 80C
  • Pay health insurance premiums
…the Old Regime usually saves more tax, despite higher slab rates.

📉 Deductions can significantly reduce your taxable income, which the New Regime simply doesn’t allow.

📊 6. High Salary Earners: Do the Math Carefully

For salaries above ₹12–15 lakh, the answer isn’t automatic.

  • With deductions? → Old Regime often better
  • Without deductions? → New Regime may still win
🔎 This is where personal tax calculation becomes crucial.

🔄 7. You Can Switch — But There’s a Catch

  • Salaried employees can choose their regime every year
  • Business/professional income earners get limited chances to switch
⚠️ Always inform your employer in advance, or you may have to fix things while filing your return.

🧠 8. Smart Rule of Thumb (Easy Shortcut)

Use this quick guide:

Your Situation

Better Regime

Minimal investments

✅ New

Rent + insurance + PF

✅ Old

Home loan

✅ Old

First job, no tax planning

✅ New

Family + long-term savings

✅ Old

🏁 Final Verdict: There’s No Universal Winner

The New Tax Regime rewards simplicity.
The Old Tax Regime rewards discipline and planning.

👉 The real winner is the regime that fits your salary structure and lifestyle.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

For more interesting updates click and follow Indiaherald WhatsApp channel

Find Out More:

Tax

Related Articles: