Tax Regime Impact
The battle between "Simplicity" and "Optimization." Understanding when to switch regimes is the key to saving thousands.
Scenario A
When is the New Regime Better?
The "Default" Choice
Best for 70% of taxpayers
The New Regime is designed for the modern employee who prefers cash in hand over locking money into specific investments.
- You have low investments (less than ₹1.5L/year).
- You do not have a Home Loan.
- You just started your career (Income < ₹15L).
Why it wins: Lower Tax Rates
New Regime Rate (10L - 12L Income)15% Tax
Old Regime Rate (Same Income)30% Tax
*New regime slashes tax rates by half in middle-income brackets.
The Math
The "Tipping Point": ₹3.75 Lakhs
The Golden Rule of Deductions
Do your total deductions (80C + 80D + HRA + Home Loan Interest) exceed ₹3,75,000?
< ₹3.75 Lakhs
Stick to New Regime
> ₹3.75 Lakhs
Switch to Old Regime
Scenario B
When is the Old Regime Better?
The "Optimization Stack"
To beat the New Regime, you generally need to stack all three of these major deductions. If you miss even one, the New Regime often wins.
The Winning Formula
Section 80C₹1.5 L
Home Loan Interest+ ₹2.0 L
Standard Deduction+ ₹50 K
Total Shield₹4.0 L
Home Loan Borrowers
Section 24(b) allows you to deduct up to ₹2 Lakhs of interest paid on your home loan. This is the biggest differentiator.
HRA Claimants
If you pay rent of ₹20k/month in a metro city, HRA exemption can massively reduce taxable income.