Tax regime

A tax regime is the rule set your income tax is worked out under. India has two: the new regime, with lower rates and a large rebate but few deductions, and the old regime, with higher rates but many deductions. The new regime is the default; you can opt for the old one.

What separates the two

The new regime gives you lower slab rates and a rebate that makes a moderate income tax-free, but you give up almost every deduction. The old regime charges higher rates, but lets you claim section 80C, HRA, home-loan interest and many others. In short, the new regime rewards a simple salary; the old regime rewards someone with a lot of genuine deductions to claim.

Which one is better

There is no universal answer; it depends on how much you can actually deduct. Add up your real 80C, HRA, home-loan and other claims. If they are large, the old regime’s higher rates may still leave you paying less; if they are small, the new regime’s lower rates usually win. The standard deduction applies in both, so it does not tip the choice. Compare both on your own numbers every year, because your deductions and the rules both change.

How to decide

The quickest way is to run both regimes with your figures in the income tax calculator, and read old vs new tax regime for the full walkthrough. Slabs and rules change each Budget, so confirm the current position on incometax.gov.in before you lock in a choice.