With recent union budget reforms enhancing standard deductions and rebate thresholds under Section 87A, choosing between the New Tax Regime (Section 115BAC) and the traditional Old Tax Regime has become one of the most critical financial decisions for salaried taxpayers.
The Breakeven Threshold Rule
The choice boils down to your total eligible deductions:
- If deductions exceed ₹3,75,000 to ₹4,25,000 (combining Section 80C, 80D, Section 24b Home Loan Interest, and substantial HRA), the Old Tax Regime usually yields higher tax savings.
- If deductions are modest or zero (no home loan, living in own home without HRA), the New Tax Regime delivers lower marginal rates and zero paperwork hassle.
Key Advantage of New Tax Regime
Salaried individuals earning up to ₹7,75,000 (after the enhanced ₹75,000 standard deduction) pay zero tax under the New Regime due to the Section 87A rebate.
Quick Comparison of Slabs & Deductions
| Feature | New Tax Regime | Old Tax Regime |
|---|---|---|
| Standard Deduction | ₹75,000 | ₹50,000 |
| Section 80C (EPF/ELSS/PPF) | Not Allowed | Up to ₹1,50,000 |
| HRA Exemption | Not Allowed | Fully Allowed |
| Home Loan Interest (Sec 24b) | Not Allowed (Self-occupied) | Up to ₹2,00,000 |
| Tax-Free Income Limit | ₹7.75 Lakhs | ₹5.00 Lakhs |
