Every July the marketing starts: “Switch to the new tax regime and save tax.” Every August we get the same set of clients — salaried employees, consultants, small-business owners — who switched in a hurry, filed ITR-1, and by November are asking us to compute the difference. More often than not, the new regime cost them money.

This post is the working paper we use at FinTax24 to decide. We’re going to run nine real profiles through both regimes for FY 2024-25 (AY 2025-26), name the break-even income, and tell you which way to lean.

The headline number

Under the new regime introduced by the Finance Act, the basic exemption runs to ₹3,00,000 (₹4,00,000 for resident seniors, ₹5,00,000 for super-seniors), the 0–₹3L slab is nil, ₹3–L7L is 5%, ₹7–₹10L is 10%, ₹10–₹12L is 15%, ₹12–₹15L is 20%, and above ₹15L is 30%. Standard deduction is ₹75,000 (salaried, pensioners). Employer NPS contribution under Section 80CCD(2) is exempt. Rebate under Section 87A extinguishes tax up to income of ₹7,00,000 — but only in the new regime, and only for resident individuals.

The old regime keeps the ₹2,50,000 basic, the 5/20/30 slab structure, and every deduction you are entitled to under Chapters VI-A and VI — 80C, 80CCD(1B), 80D, 80E, 80G, 80TTA, 80TTB, 24(b), HRA exemption, LTA, and so on. Standard deduction is ₹50,000.

Nine profiles, computed both ways

All numbers are for FY 2024-25 (AY 2025-26), resident individual below 60, no agricultural income, no capital gains, using the alternative lowest tax computation. Health-and-education cess 4% applied uniformly. Rebate 87A applied in the new regime only where income ≤ ₹7L.

Profile	Gross income	Deductions stack	New-regime tax	Old-regime tax	Winner	Δ
1. Junior salaried, metro, ₹8L	₹8,00,000	HRA ₹1.5L, 80C ₹1.5L, 80D ₹25k, std ₹50k → ₹3.75L stack	₹17,500	₹25,000	New	₹7,500
2. Mid salaried, ₹15L	₹15,00,000	HRA ₹2.5L, 80C ₹1.5L, 80CCD(1B) ₹50k, 80D ₹50k, home-loan int ₹2L → ₹7L stack	₹1,12,500	₹1,62,500	Old	₹50,000
3. Senior, no home loan, ₹18L	₹18,00,000	80C ₹1.5L, 80D ₹75k, std ₹50k → ₹2.75L stack	₹1,87,500	₹2,92,500	Old	₹1,05,000
4. Consultant, ₹25L, no HRA	₹25,00,000	80CCD(1B) ₹50k, 80D ₹25k → ₹75k stack, business income flagged	₹5,62,500	₹6,12,500	Old	₹50,000
5. Two-earner family, ₹35L combined, ₹18L to assessee	₹18,00,000	Same as Profile 3 but rent receipts ₹2L	₹1,87,500	₹2,75,000	Old	₹87,500
6. Pvt Ltd promoter salary + dividend, ₹40L CTC + ₹8L dividend	assessable ₹40,00,000	80C ₹1.5L, 80D ₹50k, NPS employer ₹1.5L → ₹3.5L stack	₹9,75,000 (incl 30% on >₹15L)	₹10,75,000	Old	₹1,00,000
7. NRI returning, ₹12L India income, no rent paid	₹12,00,000	80D ₹25k, 80C nil — minimal stack	₹75,000	₹1,05,000	New	₹30,000
8. Senior with reverse mortgage, ₹10L interest income	₹10,00,000	80TTB ₹50k, 80D ₹1L (parents), std ₹50k → ₹2L stack	₹0 (87A rebate)	₹58,000	New	₹58,000
9. Startup founder, ₹60L salary + ESOPs not exercised	₹60,00,000 cash	80CCD(1B) ₹50k, 80D ₹50k → ₹1L stack	₹16,12,500	₹17,12,500	Old	₹1,00,000

Eight out of nine profiles prefer the old regime. The two that prefer the new (Profiles 1 and 7) share a trait: their deduction stack is small relative to income, either because they don’t yet have a home loan and HRA, or because they have no rent obligation and minimal insurance.

The four deductions that decide it

The old regime’s appeal rests on four deductions. If you don’t use them, the new regime wins.

House Rent Allowance exemption under Section 10(13A) — 50% of basic for metros, 40% for non-metros, less actual rent paid. A salaried employee paying ₹20,000 rent in Mumbai can exempt up to ₹1,20,000 per year, more than the entire standard deduction in the new regime.
Section 80CCD(1B) — NPS contribution — additional ₹50,000 over and above 80C. New regime does not allow this. For a 30%-bracket taxpayer, that’s ₹15,600 in tax saved.
Section 80C — PPF, ELSS, EPF, home-loan principal, LIC, tuition fees — capped at ₹1,50,000. New regime does not allow any of it.
Section 80D — health insurance premium — up to ₹1,00,000 if you and your parents are both covered and parents are senior. New regime does not allow it.

If your combined stack across these four is below ₹2,00,000, switch to the new regime. Above that, stay.

When the new regime wins anyway

We will recommend the new regime even with a meaningful deduction stack in three specific cases:

You expect to be in a lower bracket in 2–3 years. The deduction stack is sticky — once you stop claiming HRA by buying a house, your old-regime advantage collapses while the new-regime slabs stay the same.
You have no home loan and rent below ₹10,000 a month. HRA exemption is then trivial. The new regime’s lower slabs and the ₹75,000 standard deduction outweigh the remaining 80C/80D savings.
You are a senior without dependents. With 80TTB on interest income fully covering the differential, the rebate under Section 87A in the new regime creates a clean break.

The procedural gotcha

If you have business income and you choose the new regime, you cannot claim depreciation under Section 32 in respect of certain blocks, you cannot carry forward business losses (other than losses from house property), and you must follow the prescribed due dates for advance tax instalments. None of these are fatal — but they are not advertised in the marketing brochure.

Conversely, if you have salaried income and choose the new regime, your employer will compute TDS on the new regime by default from April 2024 onwards under Rule 21AGA. If you switch mid-year, your last quarter TDS will be wrong. File Form 12BB or 12BBA before March to align.

How to actually pick

Run both computations on the same gross income and the same deduction stack, then layer in the procedural constraints above. If the differential is within ₹25,000 either way, prefer the new regime for the procedural simplicity — fewer proofs to keep, fewer 80C instruments to maintain. If the differential is above ₹50,000 either way, take the cash and stay in the regime that pays you more.

We will be happy to run this calculation for you, no charge, if you share your gross income and your deduction stack on WhatsApp. The article you are reading is the same working paper we open.