For a salaried employee, the income tax comparison between old and new regime is the single most impactful financial decision of the year. Get it right and you save ₹20,000–₹1,50,000+. Get it wrong and you overpay tax you didn't need to. This guide is written specifically for salaried employees.
What Salaried Employees Must Know Before Comparing
Your total deductible amount depends on your salary structure. Most salary packages include:
- Basic salary — HRA is 40–50% of this in metros
- HRA component — the smaller of (HRA received, rent paid − 10% of basic, 50% of basic in metros) is exempt
- EPF contribution — counts toward 80C (₹1.5L limit)
- LTA — can be claimed twice in 4 years in old regime
Income Tax Comparison: Old Regime Benefits for Salaried
| Deduction | Max Amount | Applicable To |
|---|---|---|
| Standard Deduction | ₹50,000 | All salaried |
| HRA Exemption | Variable | Employees paying rent |
| Section 80C | ₹1,50,000 | EPF + PPF + ELSS + LIC |
| Section 80D | ₹25,000 + ₹25,000 (parents) | Those with health insurance |
| Home Loan Interest | ₹2,00,000 | Property owners with loan |
| NPS 80CCD(1B) | ₹50,000 | NPS subscribers |
New Regime: What Salaried Employees Get
Under the new regime, salaried employees get only ₹75,000 standard deduction. All other allowances and deductions listed above are unavailable.
Key number: If your old regime deductions (beyond standard deduction) exceed ₹1.5–2.5 lakh depending on your income slab, the old regime saves more tax. Run the comparison using the calculator above before April 1.
Income Tax Comparison: Real Salary Scenarios
| Gross CTC | Take-Home Scenario | Total Deductions | Old Regime | New Regime | Save With |
|---|---|---|---|---|---|
| ₹8L | Metro, renting, 80C ₹1.5L | ₹2.5L | ₹21,632 | ₹20,800 | New (marginally) |
| ₹12L | Metro, own house, 80C + 80D | ₹2.0L | ₹1,04,000 | ₹83,200 | New |
| ₹15L | Metro, home loan + HRA + 80C | ₹5.5L | ₹54,600 | ₹1,17,000 | Old (₹62,400) |
| ₹20L | Tier-2, home loan + 80C + NPS | ₹5.0L | ₹1,50,800 | ₹2,73,000 | Old (₹1,22,200) |
When to Do the Income Tax Comparison
Do this comparison in March–April before the financial year starts, and again in January before your employer asks for investment proof. Also re-compare if you:
- Take a home loan or repay one fully
- Get a significant salary hike moving you to a higher slab
- Stop paying rent (loss of HRA benefit)
- Increase or reduce 80C investments