Which tax regime is better for a ₹12 lakh salary in India?

New Regime — because of the ₹12.75 lakh rebate (₹12L + ₹75,000 standard deduction), your tax liability is zero under the new regime. Under the old regime, you'd still pay tax unless you have ₹3.5+ lakh in deductions like 80C, HRA, and 80D combined.

Which regime saves more tax at ₹20 lakh salary?

Old Regime if you maximize deductions: 80C ₹1.5L + NPS ₹50K + HRA ₹1.5L + home loan interest ₹2L + 80D ₹25K = ₹5.75L deductions. This can save ₹40,000–₹60,000 more than the new regime. Without these deductions, new regime saves more.

Can I switch between New and Old Tax Regime every year?

Salaried employees can switch every year at the time of filing ITR. However, if you have business income, you can switch only once from old to new regime and cannot switch back freely. Most salaried employees should calculate both options every year before declaring to their employer.

What deductions are not available in the New Tax Regime?

Major deductions unavailable in the new regime include: 80C (PPF, ELSS, LIC), 80D (health insurance), HRA exemption, home loan interest (section 24b), LTA, and professional tax exemption. Standard deduction of ₹75,000 is available in the new regime from FY 2024-25.

Is NPS deduction available in the New Tax Regime?

Employer's NPS contribution (section 80CCD(2)) is available in the new regime — this is the most valuable deduction you can claim. Employee's own NPS contribution under 80CCD(1B) of ₹50,000 is only available under the old regime.

Tax Planning

New vs Old Tax Regime 2025-26 — Which Saves More Tax?

By CalcBharat.com Finance Team · April 2026 · 10 min read

Since Budget 2020, Indian taxpayers must choose between two tax regimes every year. This guide gives you worked examples for different salary levels.

Use our Income Tax Calculator — select "Compare Both" to see New vs Old side by side.

Key Differences

Feature	New Regime	Old Regime
Standard Deduction	75,000	50,000
Section 80C	Not allowed	Up to 1.5 lakh
HRA Exemption	Not allowed	Allowed
Home Loan Interest	Not allowed	Up to 2 lakh
87A Rebate	60,000 (up to 12L income = zero tax)	12,500 (up to 5L)

At 12 Lakh Salary — New Regime = Zero Tax

Under New Regime: After Rs 75,000 standard deduction, taxable income is Rs 11.25 lakh. Tax = Rs 60,000 — fully offset by 87A rebate. Effective tax = Rs 0.

Under Old Regime with full deductions (80C + HRA): Tax = approx Rs 1.13 lakh. New Regime wins by over a lakh.

At 20 Lakh Salary — Old Regime May Win

With maximum deductions (80C + HRA + home loan + 80D + NPS = Rs 5.25 lakh total): Old Regime tax = Rs 2.93 lakh vs New Regime Rs 3.52 lakh. Old Regime saves Rs 58,500.

Choose New Regime If

Income below Rs 12 lakh (zero tax), limited deductions, young professionals, or if you prefer simplicity.

Choose Old Regime If

Income above Rs 15L with home loan + HRA + full 80C + elderly parents (80D). Total deductions must exceed Rs 3.75 lakh to make Old Regime worthwhile.

👨‍💼

CalcBharat.com Finance Team

Tax Planning Experts

Based on FY 2025-26 tax slabs. Consult a CA for personalized advice. Last updated: April 2026.

Which regime is better for a ₹12 lakh salary? +

New Regime — your tax is zero. The ₹12.75L rebate (₹12L limit + ₹75,000 standard deduction) means nil tax. Under the old regime, you'd need ₹3.5L+ in 80C/HRA/80D deductions to match that. Most people at ₹12L don't have that many deductions.

Which regime wins at ₹20 lakh salary? +

Old Regime if you fully load deductions: 80C ₹1.5L + NPS ₹50K + HRA ₹1.5L + home loan interest ₹2L + 80D ₹25K = ₹5.75L in deductions. This can save ₹40,000–60,000 more versus new regime. Without a home loan and HRA, new regime usually wins.

Can I switch regimes every year? +

Yes — salaried employees can switch at ITR filing time each year. If you have business income, you get one switch from old to new (not back). Best practice: calculate your exact tax under both regimes every March using your final deduction amounts, then declare to your employer.

What deductions do I lose in the New Regime? +

80C (PPF, ELSS, LIC), 80D (health insurance premium), HRA exemption, home loan interest under Section 24(b), LTA, and professional tax exemption. Standard deduction of ₹75,000 is still available. Employer NPS contribution (80CCD(2)) is also still deductible.

Is NPS deduction available in the New Regime? +

Yes, but only for employer's NPS contribution (80CCD(2)) — this is worth claiming regardless of regime. Employee's own NPS contribution (80CCD(1B), up to ₹50,000) is only deductible under the old regime. If your employer offers NPS, ensure they're contributing.