The old income tax regime allows a wide range of deductions and exemptions that can significantly reduce your taxable income. Understanding the tax calculation in the old regime helps you know exactly what deductions to claim — and whether it beats the new regime for your situation.
Old Regime Tax Slabs for FY 2025-26 (AY 2026-27)
| Income Range | Tax Rate (Below 60) | Senior (60–80) | Super Senior (80+) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001–₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001–₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001–₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Section 87A rebate: Up to ₹12,500 for income ≤ ₹5 lakh (old regime). 4% cess applies on all tax amounts.
Key Deductions Available in Old Regime
| Section | Deduction Type | Max Amount |
|---|---|---|
| Standard Deduction | All salaried employees | ₹50,000 |
| Section 80C | EPF, PPF, ELSS, LIC, ELSS, NSC, SSY | ₹1,50,000 |
| Section 80D | Health insurance (self) | ₹25,000 |
| Section 80D | Health insurance (parents, senior) | ₹50,000 |
| Section 24(b) | Home loan interest (let-out) | No limit |
| Section 24(b) | Home loan interest (self-occupied) | ₹2,00,000 |
| Section 80E | Education loan interest | No limit (8 yrs) |
| Section 80CCD(1B) | NPS additional contribution | ₹50,000 |
| HRA | Rent exemption (via Form 12BB) | Variable |
Worked Example: ₹12 Lakh Gross Salary
Assume: Salaried employee, metro city, paying rent ₹20,000/month, EPF ₹1.2L, PPF ₹30K, health insurance ₹15K.
| Step | Item | Amount |
|---|---|---|
| 1 | Gross Salary | ₹12,00,000 |
| 2 | − Standard Deduction | ₹50,000 |
| 3 | − HRA Exemption (calculated) | ₹72,000 |
| 4 | = Income after exemptions | ₹10,78,000 |
| 5 | − Section 80C (EPF+PPF) | ₹1,50,000 |
| 6 | − Section 80D | ₹15,000 |
| 7 | = Taxable Income | ₹9,13,000 |
| 8 | Tax (slabs applied) | ₹1,12,600 |
| 9 | + 4% cess | ₹4,504 |
| 10 | = Total Tax | ₹1,17,104 |
Old Regime: Who Benefits Most?
- Home loan borrowers: ₹2 lakh Section 24b deduction is a major benefit at 30% bracket (saves ₹62,400)
- Metro city renters: HRA exemption can reduce taxable income by ₹1–3 lakh
- High-deduction savers: Those maxing 80C + 80D + NPS save ₹2.25 lakh+ in deductions
- Senior citizens: The ₹3 lakh basic exemption (vs ₹2.5L for under-60) provides extra benefit