Since FY 2020-21 an individual has had two ways to be taxed on the same income. The old regime keeps the familiar deductions and exemptions but charges higher slab rates. The new regime charges lower rates across more slabs but takes away almost all of the deductions. Since FY 2023-24 the new regime is the default, and you opt into the old one if it suits you better.

What each regime allows

Exact slab values and the 87A rebate threshold are reset by the annual Finance Act, and the new regime’s numbers in particular have moved almost every year, so always check the figures for the year you are computing.

How to choose

It comes down to how much you actually claim. If your rent, 80C, 80D, home-loan interest and other deductions add up to a large number, the old regime often still wins. If you claim little beyond the standard deduction, the new regime almost always leaves more in hand. The break-even total of deductions shifts each year with the slabs, so the only reliable method is to run both.

Frequently asked questions

Can I switch regimes every year?

A salaried person with no business income can choose afresh each year when filing. Someone with business or professional income has one chance to move back to the old regime and then loses further flexibility.

Which regime does my employer use for TDS?

The one you intimate at the start of the year. If you say nothing, the employer applies the new regime as the default.

Does the regime I pick for TDS lock me in at return time?

No. A salaried individual can still choose the other regime when filing the return, if it is more beneficial.

Compare both side by side for your salary with the Income Tax Calculator, then check the monthly effect in the TDS on Salary Calculator.