Old vs New Tax Regime: What Changed in 2025-26?
The Union Budget 2025-26 made the new tax regime the default option for all taxpayers. However, you can still opt for the old regime if it benefits you. Understanding the differences is crucial for tax planning.
The key change is that the new regime now offers a standard deduction of ā¹75,000 (up from ā¹50,000) and has revised slabs that benefit middle-income earners. But the old regime still allows deductions under Section 80C, 80D, HRA, and other sections.
Use our free Income Tax Calculator to instantly compare both regimes with your actual numbers.
Tax Slabs 2025-26: Side-by-Side Comparison
New Tax Regime Slabs (Default)
| Income Range | Tax Rate |
|---|---|
| Up to ā¹3,00,000 | Nil |
| ā¹3,00,001 ā ā¹7,00,000 | 5% |
| ā¹7,00,001 ā ā¹10,00,000 | 10% |
| ā¹10,00,001 ā ā¹12,00,000 | 15% |
| ā¹12,00,001 ā ā¹15,00,000 | 20% |
| Above ā¹15,00,000 | 30% |
Old Tax Regime Slabs
| Income Range | Tax Rate |
|---|---|
| Up to ā¹2,50,000 | Nil |
| ā¹2,50,001 ā ā¹5,00,000 | 5% |
| ā¹5,00,001 ā ā¹10,00,000 | 20% |
| Above ā¹10,00,000 | 30% |
Note: A 4% Health and Education Cess is applicable on the total tax amount in both regimes.
Deductions Available in Old Regime
The old regime's biggest advantage is the wide range of deductions:
- Section 80C (up to ā¹1.5 lakh): EPF, PPF, ELSS mutual funds, NSC, life insurance premium, home loan principal repayment, children's tuition fees
- Section 80D (up to ā¹75,000): Health insurance premium ā ā¹25,000 for self/family + ā¹50,000 for senior citizen parents
- HRA Exemption: If you pay rent and receive HRA, a portion is tax-exempt based on a formula
- Section 80E: Interest on education loan ā full deduction with no limit
- Section 24(b): Home loan interest up to ā¹2 lakh for self-occupied property
- Section 80CCD(1B): NPS contribution up to ā¹50,000 over and above 80C
- Standard Deduction: ā¹50,000 flat deduction for salaried employees
If your total deductions exceed ā¹3-4 lakhs, the old regime likely saves you more tax. Try our calculator with your actual numbers to be sure.
When to Choose New Regime
The new regime is better for you if:
- You don't have significant tax-saving investments (80C, 80D)
- You don't pay rent or receive HRA
- You don't have a home loan
- Your salary is below ā¹12 lakh (effectively zero tax under new regime with rebate)
- You prefer simplicity over tax planning
Big Benefit: Under the new regime, if your total income is up to ā¹12,00,000, you pay zero tax thanks to the Section 87A rebate. This makes it very attractive for entry-level and mid-level professionals.
When to Choose Old Regime
The old regime saves more tax when:
- You invest ā¹1.5 lakh+ in EPF/PPF/ELSS (Section 80C)
- You pay health insurance premiums (Section 80D)
- You pay significant rent and get HRA from your employer
- You have a home loan with interest payments (Section 24)
- Your annual deductions exceed ā¹3-4 lakhs
Example: A person earning ā¹15 lakh with ā¹1.5 lakh in 80C, ā¹50,000 in 80D, ā¹1.8 lakh in HRA, and ā¹2 lakh home loan interest saves approximately ā¹1.2 lakh more in the old regime.
How to Calculate Your Tax ā Step by Step
Instead of manual calculation, use our Income Tax Calculator which does this instantly. Here's what it calculates:
- Gross Income: Your total salary or income
- Deductions: 80C, 80D, HRA, home loan interest, NPS
- Taxable Income: Gross income minus all applicable deductions
- Tax Amount: Apply the slab rates to your taxable income
- Cess: Add 4% Health and Education Cess
- Final Tax: Total tax payable after rebate (if applicable)
Our calculator shows you the tax under both regimes side by side, so you can instantly see which one saves you more.
ā Frequently Asked Questions
Which tax regime is better for salary of ā¹10 lakh?
For a ā¹10 lakh salary, the new regime is usually better if you don't have significant deductions. Under the new regime, with the standard deduction, your effective tax could be as low as ā¹30,000. Use our Income Tax Calculator to compare with your exact deductions.
Can I switch between old and new regime every year?
Yes, salaried employees can switch between old and new regime every financial year. Self-employed individuals can switch once from new to old, but then it becomes permanent.
Is the ā¹12 lakh zero tax really true?
Yes, under the new regime for FY 2025-26, income up to ā¹12 lakh is effectively tax-free due to the Section 87A rebate of ā¹60,000. The standard deduction of ā¹75,000 makes it even more beneficial.
What is Section 87A rebate?
Section 87A provides a rebate that effectively makes your tax zero if your taxable income is within the specified limit. For FY 2025-26, under the new regime, the rebate is up to ā¹60,000 for taxable income up to ā¹12 lakh.
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