what is the standard deduction in the new tax regime

The standard deduction under the new regime is ₹75,000 for salaried taxpayers and pensioners, against ₹50,000 under the old regime. It is applied to salary income automatically and needs no proof, no receipt and no investment. Along with the wider slabs, it is one of the two reasons the new regime works out cheaper for most salaried people who have no home loan and no large HRA claim.

section 87A rebate meaning

The Section 87A rebate is a direct reduction in tax payable, available to resident individuals whose taxable income falls below a threshold, and it can bring the final tax bill to zero. Under the new regime it extends to ₹12 lakh of taxable income; under the old regime it stops at ₹5 lakh. It applies to income taxed at ordinary slab rates, not to capital gains that carry their own special rates.

the income tax regime that applies if you do not choose one is

The new regime. It is the default, so a salaried person who declares nothing and claims nothing is taxed under it automatically, and the old regime now has to be opted into rather than out of. That makes doing nothing a decision in itself — usually the right one, but an expensive one for anyone with a large metro HRA claim or a home loan.

how much deduction do I need before the old tax regime is cheaper

For most salary levels the old regime only overtakes the new one once total deductions reach somewhere around ₹4.5–6 lakh. In practice that threshold needs home loan interest, a substantial metro HRA exemption, or both — Section 80C on its own, capped at ₹1.5 lakh, does not come close. The exact break-even shifts with income, so the comparison is worth running on your own numbers rather than on a rule.

can I switch between the old and new tax regime every year

Salaried taxpayers with no business income can choose afresh each financial year when filing the return, so the decision is never permanent. Taxpayers with business or professional income face a tighter rule: once they opt out of the new regime, they can generally return to it only once. That is why the comparison is worth rechecking after any change — a new home loan, a move to a metro, a switch from salary to consulting.

Old regime, new regime, and the tax-saving trap

India now runs two parallel income tax systems. The old regime has lower exemption limits but lets you subtract a long list of deductions. The new regime has wider slabs and a larger standard deduction, but almost nothing else. The new one is the default, which means doing nothing is a choice.

Think of it like this

À la carte or the thali

One restaurant charges per dish and lets you order exactly what you want. The other serves a fixed thali at a flat price. If you eat a lot of specific things, à la carte wins. If you eat normally, the thali is cheaper and you do not have to think about it.

In the market

The old regime is à la carte: it rewards you for each deduction you can genuinely claim. The new regime is the thali. Most salaried people without a home loan eat normally.

What each regime actually gives you

The two systems

Old regime

Standard deduction of ₹50,000
Section 80C up to ₹1.5 lakh — EPF, ELSS, PPF, life premium, principal on a home loan
HRA exemption, which can be large in a metro
Section 24: home loan interest up to ₹2 lakh
Section 80D for health insurance premiums
Section 80CCD(1B): an extra ₹50,000 for NPS
Narrower slabs — 30% starts at ₹10 lakh

New regime

Standard deduction of ₹75,000
Nil tax up to ₹4 lakh, and a full rebate up to ₹12 lakh of taxable income
Wider slabs — 30% starts much higher
Employer NPS contribution under 80CCD(2) still allowed
Almost no other deductions: no 80C, no HRA, no Section 24 on a self-occupied home
It is the default, so you must opt out to use the old one

Loading interactive demo…

Enter what you actually claim, not what you theoretically could. The tool also reports how much you would need to claim before the old regime catches up.

The trap

Every January, offices across India fill with people buying insurance policies, ELSS units and five-year deposits to "save tax". The saving is real. What it costs is usually invisible.

Worked example

What a tax-saving purchase really costs

₹1.5 lakh into an endowment policy, purely for 80C

Tax savedAt 30% plus cess, in the old regime₹46,800

Locked in forSurrender before that and you lose heavily15–20 years

Return earnedTypical for a participating endowment policy~4.5% a year

Same money in an index fundHistorical long-run Indian equity~11% a year

Gap over 15 yearsOn the same ₹1.5 lakh₹4.4 lakh vs ₹7.2 lakh

Net positionAfter counting the ₹46,800 savedDown ₹2.3 lakh

The tax saving was genuine and the decision still lost money. This is the difference between a deduction you were going to earn anyway — EPF, rent, a term premium, a home loan — and a product bought specifically to create one.

◆ Your call

The January email

HR asks for investment proofs by the end of the month. You earn ₹18 lakh, rent a flat in Bengaluru with an HRA claim of ₹2.6 lakh, have EPF of ₹1.1 lakh, and no home loan. A colleague suggests topping up 80C with a ULIP.

Check yourself

You have no home loan, live with family so claim no HRA, and your only 80C is ₹90,000 of EPF. Which regime is almost certainly cheaper?

Simple bhasha mein

Thali ya alag-alag order

Thali fix daam pe milti hai, alag-alag order karo toh har cheez ka paisa. Naya regime thali hai, purana alag-alag. Jab tak ghar ka loan ya bada HRA na ho, thali hi sasti padti hai — aur March mein tax bachane ke liye koi policy khareedna, ulta mehnga sauda hai.

What to remember

The new regime is the default — staying in it is a decision, not an accident.
The old regime typically needs ₹4.5–6 lakh of deductions before it wins.
Deductions you would earn anyway are free; products bought to create them are not.
A 4.5% return locked for fifteen years is not worth a one-time 30% saving.
You may switch regimes each year if you have no business income — so recheck after a home loan or a move.

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Common questions

Short, direct answers to what people ask about this topic.

what is the standard deduction in the new tax regime: The standard deduction under the new regime is ₹75,000 for salaried taxpayers and pensioners, against ₹50,000 under the old regime. It is applied to salary income automatically and needs no proof, no receipt and no investment. Along with the wider slabs, it is one of the two reasons the new regime works out cheaper for most salaried people who have no home loan and no large HRA claim.
section 87A rebate meaning: The Section 87A rebate is a direct reduction in tax payable, available to resident individuals whose taxable income falls below a threshold, and it can bring the final tax bill to zero. Under the new regime it extends to ₹12 lakh of taxable income; under the old regime it stops at ₹5 lakh. It applies to income taxed at ordinary slab rates, not to capital gains that carry their own special rates.
the income tax regime that applies if you do not choose one is: The new regime. It is the default, so a salaried person who declares nothing and claims nothing is taxed under it automatically, and the old regime now has to be opted into rather than out of. That makes doing nothing a decision in itself — usually the right one, but an expensive one for anyone with a large metro HRA claim or a home loan.
how much deduction do I need before the old tax regime is cheaper: For most salary levels the old regime only overtakes the new one once total deductions reach somewhere around ₹4.5–6 lakh. In practice that threshold needs home loan interest, a substantial metro HRA exemption, or both — Section 80C on its own, capped at ₹1.5 lakh, does not come close. The exact break-even shifts with income, so the comparison is worth running on your own numbers rather than on a rule.
can I switch between the old and new tax regime every year: Salaried taxpayers with no business income can choose afresh each financial year when filing the return, so the decision is never permanent. Taxpayers with business or professional income face a tighter rule: once they opt out of the new regime, they can generally return to it only once. That is why the comparison is worth rechecking after any change — a new home loan, a move to a metro, a switch from salary to consulting.