Definition
Old vs New Tax Regime
India offers two personal income-tax regimes: the old one with various deductions and exemptions, and the new one with lower slab rates but most exemptions removed.
The old regime lets you claim deductions and exemptions like Section 80C, 80D, HRA and LTA, but applies higher slab rates. The new regime offers lower slab rates and a higher basic exemption but disallows most of those deductions; it is the default regime.
Which is better depends on how many deductions you can claim: those with large 80C, home-loan, HRA and insurance claims may benefit from the old regime, while those with few deductions often pay less under the new one.
Salaried taxpayers can usually choose each year. The standard deduction is available in both, so the comparison hinges mainly on your other eligible deductions.
Related terms
- HRA ComponentHouse Rent Allowance is a salary component meant to cover rent that can be partly tax-exempt if you actually pay rent, with the exemption based on a prescribed formula.
- Form 12BBForm 12BB is the declaration an employee submits to their employer detailing investments and expenses claimed for tax, so the employer can deduct the correct TDS from salary.
- Standard Deduction (Salary)The standard deduction is a flat amount subtracted from salary or pension income without needing proof, reducing taxable income for salaried individuals and pensioners.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.