New vs Old Tax Regime (FY 2025-26): Which Saves You More?
Every year at tax time, salaried taxpayers in India face the same question: should I go with the new tax regime or the old one? For FY 2025-26 (assessment year 2026-27) the new regime has become even more attractive, but the old regime can still win if you claim large deductions. Here’s a plain-English comparison to help you decide — and a free income tax calculator to check your own numbers both ways.
The new regime slabs (FY 2025-26)
The new regime is now the default. Its slabs are:
- Up to ₹4,00,000 — nil
- ₹4,00,001 to ₹8,00,000 — 5%
- ₹8,00,001 to ₹12,00,000 — 10%
- ₹12,00,001 to ₹16,00,000 — 15%
- ₹16,00,001 to ₹20,00,000 — 20%
- ₹20,00,001 to ₹24,00,000 — 25%
- Above ₹24,00,000 — 30%
Two things make it generous: a ₹75,000 standard deduction for salaried taxpayers, and a Section 87A rebate that effectively makes tax zero for taxable income up to ₹12 lakh. What it gives up is most of the familiar deductions.
The old regime slabs (below 60)
- Up to ₹2,50,000 — nil
- ₹2,50,001 to ₹5,00,000 — 5%
- ₹5,00,001 to ₹10,00,000 — 20%
- Above ₹10,00,000 — 30%
The old regime has higher rates sooner, but it lets you claim a long list of deductions — Section 80C (up to ₹1.5 lakh for EPF, PPF, ELSS, life insurance, home-loan principal), 80D (health insurance), HRA, home-loan interest under Section 24, NPS, and more — plus a ₹50,000 standard deduction. Its 87A rebate makes tax zero up to ₹5 lakh taxable income.
So which one is better?
The honest answer is “it depends on your deductions.” A simple rule of thumb:
- Few deductions → new regime. If you don’t invest much in 80C, don’t pay rent (no HRA) and have no home loan, the new regime almost always wins thanks to lower rates and the bigger rebate.
- Large deductions → old regime may win. If you fully use 80C, pay significant HRA, and claim home-loan interest, those deductions can lower your taxable income enough that the old regime beats the new one.
The break-even point depends on your income and exactly how much you can deduct, which is why it’s worth checking your real figures rather than relying on a rule of thumb.
A quick worked example
Suppose you earn ₹12,00,000 a year as a salaried employee. Under the new regime, after the ₹75,000 standard deduction your taxable income is ₹11,25,000 — below ₹12 lakh, so the 87A rebate brings your tax to zero. Under the old regime, to get anywhere near zero you’d need very large deductions (80C, HRA, home-loan interest) — so for most people at this income, the new regime is the clear winner. At higher incomes with a home loan and full 80C, the maths can flip. Run both in the calculator to see your break-even.
How to decide in two minutes
- Open the income tax calculator.
- Enter your gross annual income and calculate under the new regime.
- Switch to the old regime, enter your total deductions (80C, 80D, HRA, home-loan interest), and calculate again.
- Compare the two totals — pick the regime with the lower tax.
Frequently asked questions
Can I switch regimes every year? Salaried taxpayers can generally choose each year. Those with business income have more restrictions.
Is the standard deduction available in both? Yes — ₹75,000 in the new regime and ₹50,000 in the old, for salaried taxpayers and pensioners.
Does the calculator include surcharge? The tool covers the common case; very high incomes (above ₹50 lakh) also attract a surcharge, so confirm with a professional.
This article is general information, not tax advice. Verify your situation with a qualified professional.