Old vs new tax regime: how to choose
To choose between the old and new tax regime, calculate your tax under both with your actual deductions and pick the lower number. The new regime has lower slab rates with few deductions; the old regime has higher rates but lets you claim deductions such as 80C, HRA and home-loan interest. Rates change by Budget, so use the current assessment year’s figures.
Step-by-step method
- List your total income for the year
- List every deduction you can legally claim under the old regime (80C, 80D, HRA, home-loan interest, NPS and others)
- Compute tax under the old regime with those deductions
- Compute tax under the new regime with its standard deduction only
- Compare the two and choose the lower; remember business owners have limits on switching back
Who usually benefits from the old regime?
People with large eligible deductions, such as home-loan interest plus 80C and HRA, often pay less in the old regime. People with few deductions often pay less in the new regime.
What about business owners?
If you have business income, the rule on switching between regimes is stricter than for salaried people. Check the current rule or ask your CA before opting out of the new regime.
Frequently asked questions
Which regime is better for 2026-27?
It depends on your deductions. Run both calculations with current rates, or use FINOVAQ’s comparison, which uses your own numbers.
Can I change the regime every year?
Salaried individuals can generally choose each year. Individuals with business income have limited chances to switch. Confirm the current rule.