Old vs New Tax Regime: Detailed Comparison (FY 2025-26)
Old vs new income tax regime comparison — slabs, deductions, standard deduction, who should choose which. Examples, calculator.
The new tax regime (Section 115BAC) was introduced in 2020 and has been revised multiple times. For FY 2025-26 the slabs were widened and the Section 87A rebate raised to ₹60,000, so a salaried person pays no tax on salary up to ₹12.75 lakh. In this guide, we compare old vs new regime at FY 2025-26 rates (returns filed in 2026 under the Income-tax Act, 1961) and help you choose. From tax year 2026-27 the same choice continues under the Income-tax Act, 2025; check the rates in force for that year before planning.
Old Tax Regime (FY 2025-26)
Default regime before 2020. Allows 80C, 80D, 80CCD, 24(b), HRA, LTA, etc. Higher tax rates but more deductions.
| Income | Rate |
|---|---|
| Up to ₹2.5L | Nil |
| ₹2.5L-₹5L | 5% |
| ₹5L-₹10L | 20% |
| >₹10L | 30% |
Standard deduction: ₹50,000. Rebate under 87A: up to ₹12,500 where total income does not exceed ₹5L. Surcharge: 10% (₹50L-1Cr), 15% (₹1-2Cr), 25% (₹2-5Cr), 37% (above ₹5Cr). Health and education cess: 4%.
New Tax Regime (FY 2025-26)
Introduced in 2020. Lower tax rates but most deductions are not allowed. Default regime from FY 2023-24.
| Income | Rate |
|---|---|
| Up to ₹4L | Nil |
| ₹4L-₹8L | 5% |
| ₹8L-₹12L | 10% |
| ₹12L-₹16L | 15% |
| ₹16L-₹20L | 20% |
| ₹20L-₹24L | 25% |
| >₹24L | 30% |
Standard deduction: ₹75,000. Rebate under 87A: up to ₹60,000 where total income does not exceed ₹12L (with marginal relief just above; not available against special-rate income such as capital gains under Section 111A or 112A). Surcharge: same as old, but capped at 25%. Most other deductions (80C, 80D, 80CCD, 24(b), HRA, LTA) are NOT allowed.
Allowed Deductions
| Deduction | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| 80C (PPF, ELSS, LIC, EPF, home loan principal) | Up to ₹1.5L | Not allowed |
| 80CCD(1B) (NPS) | Up to ₹50K (over 80C) | Not allowed |
| 80CCD(2) (Employer NPS) | Up to 10% of basic + DA (14% for government employers) | Up to 14% of basic + DA |
| 80D (Health insurance) | Up to ₹25K-₹1L | Not allowed |
| 80E (Education loan interest) | No limit (8 years) | Not allowed |
| 80G (Donations) | 50-100% of donation | Not allowed |
| 80TTA (Savings interest) | Up to ₹10K | Not allowed |
| 24(b) (Home loan interest) | Up to ₹2L (self-occupied) | Not allowed |
| HRA exemption | Yes (min of 3 conditions) | Not allowed (only if you opt for old) |
| LTA | Yes (2 trips in 4 years) | Not allowed |
| Conveyance / medical allowance | Fully taxable since FY 2018-19 (folded into the standard deduction) | Fully taxable |
Comparison Examples
| Income | Old Regime Tax | New Regime Tax | Savings |
|---|---|---|---|
| ₹5L salary (no deductions) | Nil (87A rebate) | Nil (87A rebate) | Same |
| ₹7L salary (no deductions) | ₹44,200 | Nil (87A rebate) | New saves ₹44,200 |
| ₹10L salary (₹1.5L 80C + ₹25K 80D) | ₹70,200 | Nil (87A rebate) | New saves ₹70,200 |
| ₹15L salary (₹1.5L 80C + ₹25K 80D + ₹2L HRA) | ₹1,40,400 | ₹97,500 | New saves ₹42,900 |
| ₹25L salary (₹1.5L 80C + ₹25K 80D + ₹2L home loan interest + ₹50K NPS) | ₹4,36,800 | ₹3,19,800 | New saves ₹1,17,000 |
| ₹50L salary (₹9.5L of deductions, including ₹5L HRA) | ₹10,53,000 | ₹10,99,800 | Old saves ₹46,800 |
Worked at FY 2025-26 rates for a salaried individual under 60, after the standard deduction, including 4% cess and with no surcharge. The new regime usually wins unless deductions are large; at high salaries the old regime starts to win once deductions are around ₹8-9 lakh or more.
How to Choose
- Salary up to ₹12.75 lakh: New regime (₹0 tax after the standard deduction and 87A rebate)
- Salary ₹12.75 lakh-₹25 lakh: New regime in most cases; compare only if deductions (HRA, 80C, 80D, home loan) are very large
- Higher salaries with heavy deductions (roughly ₹8-9 lakh or more of HRA, 80C, 80D, NPS, home loan): Old regime may save tax, so compute both
- For senior citizens (without business income): Old regime is usually better (no 80TTB in new)
- For NRI: Both regimes work. Choose based on deductions.
How to Switch
- Salaried employees (no business income): can choose either regime every year in the ITR, filed by the due date; the choice told to the employer only decides TDS
- Business / profession: opting out of the new regime needs Form 10-IEA by the Section 139(1) due date; after opting out, you can return to the new regime only once
- A belated return is taxed under the new regime only, because the option to choose the old regime must be exercised by the due date
Frequently Asked Questions
Q: Which regime is better for ₹10 LPA?
A: For FY 2025-26, the new regime: a ₹10 lakh salary is fully covered by the ₹75,000 standard deduction and the ₹60,000 Section 87A rebate, so the tax is nil, while the old regime still charges tax unless deductions are very large. Use our Income Tax Calculator for your figures.
Q: Can I switch regimes every year?
A: Salaried without business income: yes, every year, in the ITR filed by the due date. With business or professional income: you can opt out of the new regime by filing Form 10-IEA, and after that you can come back to the new regime only once.
Q: Is new regime default?
A: Yes, since FY 2023-24 the new regime is the default for individuals, HUFs, AOPs and BOIs. Salaried taxpayers opt out by choosing the old regime in the ITR filed by the due date (and telling the employer for TDS); taxpayers with business income file Form 10-IEA by the due date.
Q: What is the rebate limit under 87A?
A: For FY 2025-26: new regime, a rebate of up to ₹60,000 where total income does not exceed ₹12 lakh (no tax up to ₹12 lakh, or ₹12.75 lakh of salary), with marginal relief just above. Old regime: up to ₹12,500 where total income does not exceed ₹5 lakh.
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