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New vs old tax regime for FY 2025–26: which one actually saves you more

The new regime is the default and looks simpler, but the old regime still wins for many taxpayers with a full deduction stack. Here's how to run the comparison for your own numbers — for assessment year 2026–27.

Read this in 30 secondsThe essentials, before the detail
Who this is for

Salaried earners and professionals choosing a tax regime for FY 2025–26 (AY 2026–27).

What you'll learn

The FY 2025–26 slabs, what each regime allows, and a live calculator to compare both for your income.

Mistake to avoid

Letting the new regime apply by default without ever checking what the old one would save you.

Talk to us when

You have a home loan, HRA and full 80C — the comparison gets close and the maths is worth doing right.

Here's the short version: India has two tax systems, and you pick one each year. The new regime has lower tax rates but almost no deductions. The old regime has higher rates but lets you claim deductions for things like rent, a home loan and investments.

Since FY 2024–25, the new regime is the default — you have to actively choose the old one. But if you have a lot of deductions, the old regime can still win. Which is better comes down to two things: what you earn, and how much you can deduct.

Below, we lay out the FY 2025–26 numbers, show two real examples, and give you a calculator to check your own figures. Want it done for you? Our income tax team runs this for every client and applies it when we file your ITR.

The short answer

If your taxable income is at or below ₹12 lakh, the new regime is almost unbeatable — the Section 87A rebate takes your tax to nil. Above that, the old regime only wins when your deductions are deep — roughly ₹4.5 lakh or more of 80C, 80D, HRA and home-loan interest combined. With thin deductions, the new regime wins at every income level.

Quick decision

Which regime is likely yours?

Taxable income ≤ ₹12 lakh New regime almost always wins — the rebate zeroes your tax
Home loan + HRA + full 80C Old regime may still win — run the calculator below
Few or no deductions New regime — see why in the slabs section
Freelancer or consultant Check Section 44ADA before you compare regimes
Want it done for you Get a regime + filing review

The new regime: slabs, rates and what you give up

The new regime offers lower slab rates but removes most deductions and exemptions. For FY 2025–26:

New regime slabs — FY 2025–26 (AY 2026–27)
Annual incomeTax rate
Up to ₹4 lakhNil
₹4 – 8 lakh5%
₹8 – 12 lakh10%
₹12 – 16 lakh15%
₹16 – 20 lakh20%
₹20 – 24 lakh25%
Above ₹24 lakh30%

Salaried employees get a standard deduction of ₹75,000. Combined with the enhanced Section 87A rebate (up to ₹60,000), taxable income up to ₹12 lakh pays nil tax — which means a salaried individual is effectively tax-free up to ₹12.75 lakh of gross salary under the new regime.

The trade-off: in the new regime you give up almost all deductions — no 80C (investments), no 80D (health insurance), no HRA (rent), no home-loan interest. The one big exception is your employer's NPS contribution, which you can still claim.

The old regime: where deductions still matter

The old regime has higher slab rates but lets you reduce taxable income meaningfully:

Old-regime deductions that still cut your tax
DeductionMax limit
Standard deductionSalaried employees₹50,000
Section 80CPPF, ELSS, LIC, EPF, home-loan principal, tuition₹1,50,000
Section 80D — health cover₹50,000 if a parent is a senior citizen₹25,000
Home-loan interestSelf-occupied property, Section 24(b)₹2,00,000
Section 80CCD(1B)Extra NPS, over and above 80C₹50,000
HRA exemptionIf you receive HRA and pay rentAs per rules
Regime calculator

Compare both regimes for your numbers

Enter your salary and deductions. We compute the tax under each regime for FY 2025–26 (including 4% cess and the 87A rebate) and flag the winner — instantly.

Old regime
New regime
Enter your figures to compare.
Estimates for a resident individual below 60, salaried, FY 2025–26. Excludes surcharge and special-rate income such as capital gains. For a precise calculation, talk to our tax team.
Want us to run this against your actual payslip? Send your salary structure and we'll tell you which regime saves more — and file under it.
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When the new regime wins

The new regime is better when your total eligible deductions are low — which describes many younger professionals, people without a home loan or HRA claim, and those who don't invest heavily in 80C instruments.

₹9 lakh salary · light deductionsNo home loan, no HRA
Old regime
Gross salary
₹9,00,000
Standard deduction
−₹50,000
80C — PPF
−₹50,000
80D — health cover
−₹15,000
Taxable income
₹7,85,000
Estimated tax₹72,500
New regime Lower tax
Gross salary
₹9,00,000
Standard deduction
−₹75,000
Taxable income
₹8,25,000
Estimated tax₹0
New regime saves ≈ ₹72,500 a year — taxable income stays under ₹12 lakh, so the 87A rebate wipes the tax out

When the old regime wins

The old regime wins when your deduction stack is deep — full 80C utilisation, home-loan interest, HRA and health insurance all adding up.

₹15 lakh salary · deep deductionsHRA + home loan + full 80C
Old regime Lower tax
Gross salary
₹15,00,000
Standard deduction
−₹50,000
HRA exemption
−₹2,40,000
Home loan interest
−₹2,00,000
80C investments
−₹1,50,000
80D — health cover
−₹25,000
Taxable income
₹8,35,000
Estimated tax₹82,700
New regime
Gross salary
₹15,00,000
Standard deduction
−₹75,000
Taxable income
₹14,25,000
Estimated tax₹97,500
Old regime saves ≈ ₹14,800 a year — the deep deduction stack still wins, but by far less than it used to

The decision rule (simplified)

Keep it simple:

  • Taxable income up to ₹12 lakh? The new regime is almost unbeatable — a rebate brings your tax to zero.
  • Earning more, with deep deductions (80C + 80D + HRA + home-loan interest adding up to roughly ₹4.5 lakh or more)? The old regime may still win — but by less than it used to.
  • Few deductions? The new regime wins at every income level.

The safe move: run the numbers both ways before you file. Or let us do it for you.

Rule of thumb: add up every deduction you can genuinely claim. If the total clears roughly ₹4–4.5 lakh and your income is above ₹12.75 lakh, the old regime is worth a serious look. Below that, the new regime almost always wins.

Frequently asked questions

Can I switch between regimes every year?

Salaried employees can switch regimes at the time of filing each year. Business owners who opt out of the new regime can only opt back in once in their lifetime — making the decision more consequential for them.

What if I don't make a choice?

The new regime is the default from FY 2024–25. If you don't indicate your preference to your employer for TDS or at the time of filing, the new regime applies automatically.

Are any deductions available in the new regime?

A few. Employer NPS contributions (Section 80CCD(2)), the standard deduction for salaried employees (₹75,000), and a handful of Section 10 allowances for specific categories. The main deductions — 80C, 80D, HRA, home-loan interest — are not available.

Does the ₹12 lakh rebate apply to capital gains?

No. The Section 87A rebate applies to income taxed at normal slab rates. Special-rate income such as short-term or long-term capital gains is taxed separately and is not covered by the rebate.

Does the regime choice affect my advance tax?

Yes. Your advance-tax estimates must use the correct regime's slabs. Miscalculating because you've used the wrong table leads to underpayment and interest under Section 234C.

Not sure which regime saves you more? Our tax team runs a full calculation for your income, deductions and investment profile, recommends the right call, and files your return under whichever regime saves you more.

Book a free consultation →

Free download

Regime comparison worksheet

A simple sheet to list every deduction you can claim and see the old-vs-new gap at a glance.

Need help filing in Bengaluru?

File under the regime that saves you more

Our Bengaluru tax team compares both regimes against your actual income and deductions, recommends the right one, and files your ITR accordingly — every year, for clients across Karnataka.

Talk to a Tax Expert
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