Old vs. New Tax Regime: HRA Impact
Compare tax savings between the Old and New Tax Regimes. Find out how claiming House Rent Allowance (HRA) exemption changes your optimal tax choice.
Regime Overview
When filing taxes or submitting investment declarations to your employer, choosing between the Old Tax Regime and the New Tax Regime is critical. The New Regime is the default, meaning employees must actively opt for the Old Regime to claim HRA and other tax-exemptions.
Specifications
| Default Regime | New Tax Regime |
| HRA Eligibility | Only under Old Tax Regime |
| Switch Frequency | Once every Financial Year (for Salaried) |
| Key Decision Factor | Total volume of tax-saving deductions |
Slabs Comparison (FY 2025-26)
The New Tax Regime offers lower tax rates but bars deductions. The Old Regime has higher rates but allows exemptions.
| Taxable Income Slab (₹) | Old Regime | New Regime |
|---|---|---|
| Up to 3,00,000 | Nil | Nil |
| 3,00,001 – 6,00,000 | 5% | 5% |
| 6,00,001 – 7,00,000 | 20% | 10% |
| 7,00,001 – 9,00,000 | 20% | 10% |
| 9,00,001 – 10,00,000 | 20% | 15% |
| 10,00,001 – 12,00,000 | 30% | 15% |
| 12,00,001 – 15,00,000 | 30% | 20% |
| Above 15,00,000 | 30% | 30% |
Deductions Comparison
| Deduction / Exemption | Old Tax Regime | New Tax Regime |
|---|---|---|
| Standard Deduction | Allowed (₹50k) | Allowed (₹75k) |
| HRA Exemption | Fully Allowed | Disallowed |
| 80C (PPF, ELSS) | Allowed up to ₹1.5L | Disallowed |
| 80D (Health Insurance) | Allowed up to ₹75k | Disallowed |
| Home Loan Interest | Allowed up to ₹2L | Disallowed |
💡 The Breakeven Rule
If your total claims (HRA + 80C + 80D + Home Loan Interest) exceed ₹3,75,000 to ₹4,25,000 annually, the Old Tax Regime will generally save you significantly more tax. Otherwise, the lower slabs of the New Tax Regime are superior.
Use Comparator Tool →Frequently Asked Questions
Can I claim HRA exemption under the New Tax Regime?
No. House Rent Allowance (HRA) exemption is completely disallowed under the New Tax Regime. To claim HRA, you must opt for the Old Tax Regime.
What deductions are allowed under the New Tax Regime?
The New Tax Regime disallows almost all deductions, including Section 80C, Section 10(13A) HRA, Section 24(b) Home Loan Interest, and Section 80D. The primary deductions retained are the Standard Deduction (₹75,000 for FY 2025-26) and Employer NPS contribution (Section 80CCD(2)).
How do I switch tax regimes?
Salaried individuals who do not have business or professional income can switch between the Old and New tax regimes every financial year. You make this declaration to your employer at the beginning of the year, and can also choose or change it when filing your Income Tax Return (ITR).