From Assessment Year 2024-25, the new tax regime (Section 115BAC) became the default — meaning unless you affirmatively opt for the old regime before filing your return, you are taxed under the new slabs. This flip surprised thousands of salaried taxpayers who had spent years optimising HRA claims, home loan interest deductions, and 80C investments, only to find they had been automatically switched to a regime that ignores all of those deductions. The good news: the choice is revocable for non-business individuals. The bad news: most people are making it without a proper break-even calculation.
Section 115BAC — New Tax Regime (Post Budget 2023 Rates)
Income up to ₹3 lakh: Nil. ₹3–6 lakh: 5%. ₹6–9 lakh: 10%. ₹9–12 lakh: 15%. ₹12–15 lakh: 20%. Above ₹15 lakh: 30%. Standard deduction of ₹75,000 allowed (enhanced from ₹50,000 in Budget 2024). 87A rebate up to ₹25,000 for income up to ₹7 lakh — effectively making income up to ₹7.75 lakh tax-free under new regime.
Statutory Reference
Break-Even Point: Old vs. New Regime
Income ₹7–10 lakh
New regime almost always better. Old regime only wins if deductions exceed ₹3.5–4.5 lakh — rare for this income band without a home loan. If you have no HRA or home loan claim: switch to new regime immediately.
Income ₹10–15 lakh
The most contested zone. Old regime wins if total deductions (HRA + 80C + 80D + 24b home loan interest) exceed ₹4.5–5.5 lakh. With a home loan of ₹40+ lakh and HRA above ₹25,000/month, old regime typically wins.
Income above ₹15 lakh
Highly individual. Surcharge and additional deductions (NPS 80CCD(1B), 80G) matter significantly. Sami Tax modelling for a client at ₹18 lakh income with home loan + NPS showed ₹38,000 annual saving by remaining in old regime.
The new regime is not "better" or "worse" — it is a trade. You trade deductions for lower rates. Whether the trade favours you depends entirely on how much deduction inventory you have actually built, not theoretically built.
— Sami Tax Individual Tax Advisory, 2024
The deduction inventory problem is real: most salaried individuals claim 80C at ₹1.5 lakh (ELSS or LIC), standard deduction at ₹75,000, and perhaps a token 80D health insurance claim of ₹25,000. Total: ₹2.5 lakh. Against this, the rate differential between old and new regimes for most slabs ranges from 0–5%. The new regime wins easily at this deduction level. The old regime only wins convincingly for taxpayers who have: HRA claim above ₹3 lakh annually, home loan interest above ₹2 lakh (Section 24b), excess NPS contributions via employer (Section 80CCD(2) — available in both regimes, but old regime handles larger corpora better), and leave travel allowance.
How to Make This Decision (This Year)
- Pull your Form 16 from last year.
- Add up every deduction and exemption you actually claimed — not theoretically could claim.
- Run the tax calculation under both regimes using the actual numbers.
- If the difference is less than ₹15,000, the regime choice is nearly irrelevant — prioritise the one that simplifies your planning.
- If the difference is above ₹30,000, the regime decision is financially meaningful for you.
- If you have changed jobs, started a home loan, or had a major income shift this year, your regime optimal may have changed from last year.
- Sami Tax offers a 15-minute regime review for salaried individuals — we do the calculation with your actual numbers, not rule-of-thumb estimates, and give you a documented recommendation.