From FY 2024-25, the New Tax Regime is the default. If you do nothing, the income tax department will apply the new regime to your ITR. But is it actually better for you? Here's a complete comparison with real examples.
New Regime Tax Slabs (FY 2025-26 & FY 2026-27)
Budget 2025 revised the new-regime slabs (effective FY 2025-26 and continuing for FY 2026-27):
| Income Range | New Regime Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Rebate u/s 87A (New Regime): Zero tax if taxable income is up to ₹12,00,000 (rebate up to ₹60,000). With the ₹75,000 standard deduction, a salaried person pays nil tax up to ₹12.75 lakh salary. The Old Regime slabs are unchanged: Nil up to ₹2.5L, 5% (₹2.5L–5L), 20% (₹5L–10L), 30% above ₹10L, with the 87A rebate only up to ₹5L taxable income.
Key Deductions: What You Can & Cannot Claim
| Deduction | New Regime | Old Regime |
|---|---|---|
| Standard Deduction (Salaried) — ₹75,000 | ✅ Available | ✅ Available (₹50,000) |
| Section 80C (PPF, ELSS, LIC) — ₹1.5 lakh | ❌ Not available | ✅ Available |
| Section 80D (Health Insurance) — up to ₹75,000 | ❌ Not available | ✅ Available |
| HRA Exemption | ❌ Not available | ✅ Available |
| Home Loan Interest (Section 24b) — ₹2 lakh | ❌ Not available | ✅ Available |
| NPS Employer Contribution — Section 80CCD(2) | ✅ Available | ✅ Available |
| Leave Travel Allowance (LTA) | ❌ Not available | ✅ Available |
Real Examples: Which Regime Saves More?
📌 Example 1: Salary ₹8 Lakh, No Investments
| Item | New Regime | Old Regime |
|---|---|---|
| Gross Salary | ₹8,00,000 | ₹8,00,000 |
| Standard Deduction | ₹75,000 | ₹50,000 |
| Taxable Income | ₹7,25,000 | ₹7,50,000 |
| Tax (before rebate) | ₹16,250 | ₹62,500 |
| Rebate u/s 87A | ₹16,250 (income ≤₹12L) | Nil |
| Total Tax + Cess | ₹0 | ₹65,000 |
📌 Example 2: Salary ₹10 Lakh, With ₹2.5 Lakh Deductions
| Item | New Regime | Old Regime |
|---|---|---|
| Gross Salary | ₹10,00,000 | ₹10,00,000 |
| Standard Deduction | ₹75,000 | ₹50,000 |
| 80C (PPF/ELSS/LIC) | – | ₹1,50,000 |
| 80D (Health Insurance) | – | ₹25,000 |
| HRA | – | ₹25,000 |
| Taxable Income | ₹9,25,000 | ₹7,50,000 |
| Total Tax + Cess | ₹0 | ₹65,000 |
📌 Example 3: Salary ₹15 Lakh, Maximum Deductions ₹4.5 Lakh
| Item | New Regime | Old Regime |
|---|---|---|
| Gross Salary | ₹15,00,000 | ₹15,00,000 |
| All Deductions | ₹75,000 | ₹4,50,000 |
| Taxable Income | ₹14,25,000 | ₹10,50,000 |
| Total Tax + Cess | ₹97,500 | ₹1,32,600 |
Simple Rule: Which Regime to Choose?
- Taxable income ≤ ₹12 lakh → New Regime (zero tax with the 87A rebate)
- Salary up to ~₹15–16 lakh with normal deductions → New Regime usually wins
- Very high deductions (home loan ₹2L + 80C ₹1.5L + 80D + large HRA, total > ~₹5–6 lakh) → compare both; Old Regime can win
- No investments, no HRA, no home loan → New Regime
FAQs
Is new tax regime default from AY 2025-26?
Yes. From FY 2024-25, the new tax regime is the default option. If you want to use the old regime, you must explicitly opt-in when filing your ITR or submit Form 10-IEA to your employer.
Can I switch regime every year?
Salaried individuals can switch every year. Business owners and professionals who opt out of the new regime cannot easily switch back.
Which is better for home loan?
If you have a home loan with significant interest (₹2 lakh under Section 24b), the old regime saves more tax — especially for income above ₹10 lakh.
Still confused? Use our free Income Tax Calculator to compare both regimes with your actual numbers in under 2 minutes.