With the introduction of the New Tax Regime, taxpayers, including NPS (National Pension System) contributors, face a critical question:
Should you stick to the Old Tax Regime or switch to the New Tax Regime?
This guide will help you:
Compare tax benefits in both regimes
Understand NPS exemptions & deductions
Use a calculator-based approach to decide the best regime
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New Tax Regime vs. Old Tax Regime: A Quick Overview
| Feature | Old Tax Regime | New Tax Regime |
| Tax Slabs | Higher rates | Lower rates |
| Deductions & Exemptions | Multiple (80C, 80CCD, HRA, etc.) | Limited (Only Standard Deduction & NPS Employer Contribution) |
| NPS Tax Benefit | Up to ₹2 lakh (80CCD(1) + 80CCD(1B)) | No deductions under 80C & 80CCD(1B), but employer contribution under 80CCD(2) is still tax-free |
| Flexibility | Beneficial for taxpayers with high deductions | Suitable for those with minimal deductions |
Which tax regime suits you? Find out with HDFC Pension’s NPS calculator!
List of Exemptions & Deductions in the Old Tax Regime
The Old Tax Regime allows multiple exemptions, including:
✔Section 80C: ₹1.5 lakh deduction (includes NPS, PPF, ELSS, life insurance, etc.)
✔Section 80CCD(1B): Additional ₹50,000 deduction exclusively for NPS
✔Section 80CCD(2):Employer’s NPS contribution (up to 10% of salary) is tax-free
✔House Rent Allowance (HRA)
✔Standard Deduction (₹50,000 for salaried individuals)
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List of Significant Exemptions in the New Tax Regime
The New Tax Regime (2023-24 onwards) offers:
✔Lower tax rates but fewer deductions
✔Standard Deduction (₹50,000) for salaried employees
✔Employer’s NPS contribution under 80CCD(2) is still tax-free
✔Rebate under Section 87A: Zero tax liability for income up to ₹7 lakh
Confused about the best regime? Use our tax calculator now!
Old vs. New Tax Regime: Which is Better for NPS Contributors?
Let’s compare with a calculator-based approach:
Case Study 1: Salaried Individual with NPS & Other Tax-Saving Investments
| Annual Income | ₹10,00,000 |
| NPS Contribution (80CCD(1)) | ₹1,00,000 |
| Additional NPS Contribution (80CCD(1B)) | ₹50,000 |
| Employer NPS Contribution (80CCD(2)) | ₹80,000 |
| Total Taxable Income (Old Regime) | ₹7,20,000 |
| Total Taxable Income (New Regime) | ₹9,50,000 |
| Final Tax Payable (Old Regime) | ₹52,500 |
| Final Tax Payable (New Regime) | ₹60,000 |
Outcome: The Old Tax Regime is better due to higher deductions, lowering taxable income.
Case Study 2: Salaried Individual with No Deductions
| Annual Income | ₹10,00,000 |
| NPS Contribution | None |
| Other 80C Deductions | None |
| Employer NPS Contribution | ₹80,000 (Tax-Free in Both Regimes) |
| Total Taxable Income (Old Regime) | ₹10,00,000 |
| Total Taxable Income (New Regime) | ₹10,00,000 |
| Final Tax Payable (Old Regime) | ₹1,12,500 |
| Final Tax Payable (New Regime) | ₹75,000 |
Outcome: The New Tax Regime is better for those without deductions.
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Summary: Which Tax Regime is Better for You?
✔ If you actively invest in NPS & other tax-saving schemes, the Old Tax Regime is better ✅
✔ If you don’t have many deductions, the New Tax Regime is more beneficial ✅
✔Employer’s NPS contribution is tax-free in both regimes ✅
Personalized financial planning is key!
Make the right choice for your retirement savings. Invest in NPS with HDFC Pension today! ?
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