The old income tax regime in India offers higher slab rates but allows over 70 deductions and exemptions including HRA, LTA, Section 80C, 80D, and home loan interest.
The old tax regime is the long-standing income tax structure in India that combines higher slab rates with a wide range of deductions and exemptions. Before the introduction of Section 115BAC in Budget 2020 (effective FY 2020-21), this was the only regime available to individual taxpayers. From AY 2024-25 (FY 2023-24) onwards the new tax regime is the default, and a salaried taxpayer wishing to continue with the old regime must explicitly opt in. Despite no longer being the default, the old regime still produces a lower tax liability for many salaried Indians — particularly those with high rent in metro cities, home loans, and structured tax-saving investments. See the TDS on salary in India guide for the monthly deduction mechanics.
The old regime slabs are unchanged for FY 2025-26:
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 — 2,50,000 | Nil |
| 2,50,001 — 5,00,000 | 5% |
| 5,00,001 — 10,00,000 | 20% |
| Above 10,00,000 | 30% |
In addition:
For senior citizens (60-79 years) the basic exemption is ₹3,00,000; for super-senior citizens (80+) it is ₹5,00,000. These higher slabs are not available under the new regime.
The old regime is attractive precisely because it allows the following — most of which are disallowed under the new regime:
| Section | Deduction / Exemption | Limit |
|---|---|---|
| 10(13A) + Rule 2A | HRA exemption | Least of three formula |
| 10(5) + Rule 2B | Leave Travel Allowance (LTA) | Twice in 4-year block |
| 16(ia) | Standard Deduction | ₹50,000 |
| 16(iii) | Professional Tax | Up to ₹2,500 |
| 24(b) | Home loan interest (self-occupied) | ₹2,00,000 |
| 24(b) | Home loan interest (let-out) | No limit, but loss capped at ₹2L |
| 80C / 80CCC / 80CCD(1) | EPF, PPF, ELSS, insurance, tuition, NSC, etc. | Combined ₹1,50,000 |
| 80CCD(1B) | Additional NPS Tier I | ₹50,000 |
| 80CCD(2) | Employer NPS contribution | 10% of basic + DA |
| 80D | Health insurance premium | ₹25,000 / ₹50,000 + parents bucket |
| 80E | Education loan interest | No limit, 8 years |
| 80EE / 80EEA | Additional home loan interest | ₹50,000 / ₹1,50,000 |
| 80G | Donations | 50% / 100%, varies |
| 80GG | Rent paid (if no HRA) | Lower formula |
| 80TTA / 80TTB | Savings bank / senior FD interest | ₹10,000 / ₹50,000 |
| 80U / 80DD | Disability deductions | ₹75,000 / ₹1,25,000 |
When fully utilised, an old-regime taxpayer can shield ₹4-6 lakh of gross salary from tax through HRA + Standard Deduction + 80C + 80D + 80CCD(1B) + home-loan interest alone.
The old regime usually produces a lower tax bill for employees who tick most of the following:
For employees without these deductions — typically junior, single, no home loan, no significant 80C — the new regime’s lower slab rates usually win.
Consider an employee with ₹15,00,000 gross annual salary, paying ₹50,000 monthly rent in Mumbai with basic salary ₹6,00,000, ₹2,40,000 HRA, full 80C utilised, ₹25,000 health insurance.
Old Regime computation:
| Component | Amount (₹) |
|---|---|
| Gross salary | 15,00,000 |
| Less: HRA exemption (least of three) | 2,40,000 |
| Less: Standard Deduction | 50,000 |
| Less: Professional Tax | 2,500 |
| Less: Section 80C | 1,50,000 |
| Less: Section 80D | 25,000 |
| Less: 80CCD(1B) NPS | 50,000 |
| Taxable Income | 9,82,500 |
| Tax (Old Regime slabs) | 1,09,000 |
| Cess @ 4% | 4,360 |
| Total tax | 1,13,360 |
New Regime computation (same gross):
| Component | Amount (₹) |
|---|---|
| Gross salary | 15,00,000 |
| Less: Standard Deduction (new) | 75,000 |
| Taxable Income | 14,25,000 |
| Tax (New Regime slabs) | 1,40,000 |
| Cess @ 4% | 5,600 |
| Total tax | 1,45,600 |
In this case the old regime saves about ₹32,000 per year. The breakeven point shifts as rent, 80C usage and salary level change.
For FY 2025-26 (AY 2026-27), the new regime is the default. To use the old regime:
Omnivoo runs both old- and new-regime simulations for every employee at the start of the year and surfaces the lower-tax choice with a one-click confirmation. The platform then applies the chosen regime to monthly TDS, recomputes whenever investment declarations change, and produces a Form 16 that matches the regime selected — so neither the employee nor the finance team has to track regime mechanics manually.
Form 16 is an annual TDS certificate issued by an employer to each employee, summarizing salary paid and income tax deducted during the financial year.
HRA is a salary component provided to employees to cover rental housing expenses, partially or fully exempt from income tax based on a prescribed formula.
Leave Travel Allowance is a salary component that provides tax-exempt reimbursement for domestic travel expenses incurred by an employee during leave.
TDS is the income tax an employer withholds from an employee's salary each month and deposits with the government on their behalf.
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