Lesson 2 of 3 · 8 min
The break-even intuition
The choice is pure arithmetic: add up the deductions you genuinely claim, then see whether they clear the break-even level that goes with your salary.
Which regime costs less is not a matter of opinion. It depends on one number: how much you can genuinely deduct under the old regime. Below a break-even level of deductions, the new regime's lower rates win; above it, the old regime's deductions win. The break-even moves with your salary.
Start with the easy zone. A salary up to ₹12.75 lakh pays nil under the new regime — the ₹75,000 standard deduction brings taxable income to ₹12 lakh, and the section 87A (now section 156) rebate wipes out the tax.
The old regime cannot match nil there unless deductions push taxable income under ₹5 lakh, which takes an enormous pile of them.
| Scenario | Tax including 4% cess |
|---|---|
| New regime, ₹75,000 standard deduction | ₹1,92,400 |
| Old regime, only its ₹50,000 standard deduction | ₹4,13,400 |
| Old regime, ₹7,50,000 of total deductions | ₹1,95,000 |
Your turn
New regime, ₹20,00,000 salary. After the ₹75,000 standard deduction, taxable income is ₹19,25,000. What is the tax before cess, in rupees?
Work it out yourself
Put your own salary in and find the break-even deduction figure for your numbers — then compare it with the deductions you can actually claim.
Income Tax Calculator — Old vs New RegimeMyth
“If you claim any deductions at all, the old regime saves you money.”
False
Deductions only matter once they clear the break-even level, which at higher salaries sits around ₹7–8 lakh a year. A ₹1.5 lakh 80C investment on its own almost never gets there. And below a ₹12.75 lakh salary the new regime's rebate makes the tax nil, which no deduction pile can beat.
I do claim deductions. Why is the old regime still not cheaper?
KabirTara
Kabirasking
I put ₹1.5 lakh into 80C every year. That is a real deduction, not a made-up one. How is the old regime not the cheaper rulebook for me?
Taraexplaining
Because you are not weighing that deduction against nothing. You are weighing it against the new regime's lower rates — which you hand back the moment you switch across.
Kabirasking
So the deduction has to pay for the rate difference before it saves me anything.
Taraexplaining
That is the whole idea of the break-even. Everything under it is you buying back ground you already had for free. Only what clears it is an actual saving.
Kabirasking
That feels backwards. I did the saving. I locked the money away.
Taraexplaining
You did, and the investment still does its own job. It is the tax label that stops paying, not the money. The arithmetic decides which rulebook costs less, and it does not care how hard you tried.
Check yourself
1 / 3
Kabir asks
At a ₹20,00,000 salary, roughly what total of old-regime deductions does it take just to draw level with the new regime?
Done reading?
Saved in this browser.