Direct Tax
Choosing between the two income-tax regimes
How the comparison works, and where the break-even usually sits
The regime choice is frequently framed as a question with a fixed answer. It is not. The comparison depends on the deductions an individual actually claims, and that changes as home loans are repaid, insurance lapses or salary structures are revised.
The structural difference
The concessional regime applies lower rates across a wider set of slabs, but withdraws most deductions and exemptions. The alternative retains those deductions at higher rates. Everything else follows from that trade.
Rates change annually
Slab rates, rebate thresholds and standard deduction amounts are revised by each Finance Act. Any comparison - including the calculators on this site - must be checked against the rules for the relevant assessment year before it is relied on.
Working through it
- Total the deductions actually claimed, not those theoretically available
- Compute liability under both regimes on the same income
- Check whether either result falls within the rebate threshold, which can change the answer sharply
- Repeat the comparison each year rather than carrying the previous decision forward
The break-even point is the level of deductions at which both regimes produce the same liability. Below it the concessional regime is generally better; above it the deduction-based regime is. Where an individual sits relative to that point is a factual question, and it moves.
Try it
The tax regime comparison tool on this site runs both computations side by side. Results are indicative and are not a substitute for advice on your specific circumstances.
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Sources and further reading
- Income-tax Act, 1961 - relevant sections
- Cite the specific Finance Act and assessment year when publishing
Please note
This article reflects the position understood at the date of publication. Legislation and its interpretation change. It is general information, not advice on any particular situation, and should not be acted on without taking advice appropriate to your own facts.