Salaried earners and professionals choosing a tax regime for FY 2025–26 (AY 2026–27).
The FY 2025–26 slabs, what each regime allows, and a live calculator to compare both for your income.
Letting the new regime apply by default without ever checking what the old one would save you.
You have a home loan, HRA and full 80C — the comparison gets close and the maths is worth doing right.
Here is the short version. India has two tax systems and you choose 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 your investments.
Since FY 2024–25, the new regime is the default. That means if you do nothing, you are already in it, and you have to actively pick the old one. So which is better? It really comes down to just two things: how much you earn, and how much you can deduct.
Below, we lay out the FY 2025–26 numbers in plain terms, show two real salary examples, and give you a calculator to check your own figures. Whether you are salaried, a freelancer, a founder or running a small business, the same rule applies. Want it done for you? Our income tax team runs this for every client and applies it when we file your ITR.
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.
Which regime is likely yours?
The new regime: slabs, rates and what you give up
The new regime gives you lower slab rates, but in return it takes away most deductions and exemptions. Here are the rates for FY 2025–26:
| Annual income | Tax rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 – 8 lakh | 5% |
| ₹8 – 12 lakh | 10% |
| ₹12 – 16 lakh | 15% |
| ₹16 – 20 lakh | 20% |
| ₹20 – 24 lakh | 25% |
| Above ₹24 lakh | 30% |
If you are salaried, you also get a flat standard deduction of ₹75,000. Add the Section 87A rebate (up to ₹60,000) on top, and taxable income up to ₹12 lakh pays zero tax. In plain terms, a salaried person earning up to about ₹12.75 lakh of gross salary pays nothing under the new regime.
So what is the catch? In the new regime you give up almost all deductions — no 80C for investments, no 80D for health insurance, no HRA for rent, and 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 charges higher slab rates, but it lets you bring your taxable income down in a big way. These are the deductions that still do the heavy lifting:
| Deduction | Max 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 rent | As per rules |
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.
When the new regime wins
The new regime wins for most people now \u2014 and not just by a little. It is the clear choice if you do not have a big stack of deductions: younger professionals early in their careers, anyone renting without an HRA claim or living in their own home without a loan, and people who do not lock much into 80C investments. With the ₹75,000 standard deduction and the ₹12 lakh rebate built in, it often beats the old regime even when you do have some deductions. Here is how it plays out:
- Gross salary
- ₹9,00,000
- Standard deduction
- −₹50,000
- 80C — PPF
- −₹50,000
- 80D — health cover
- −₹15,000
- Taxable income
- ₹7,85,000
- Gross salary
- ₹9,00,000
- Standard deduction
- −₹75,000
- Taxable income
- ₹8,25,000
When the old regime wins
The old regime wins when your deductions are large and stack up together — full 80C, home-loan interest, HRA and health insurance all claimed at once. See how this example works out:
- 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
- Gross salary
- ₹15,00,000
- Standard deduction
- −₹75,000
- Taxable income
- ₹14,25,000
The decision rule (simplified)
Here is the simple way to decide:
- Taxable income up to ₹12 lakh? The new regime is almost unbeatable — the rebate brings your tax down 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 far less than it used to.
- Few deductions? The new regime wins at every income level.
The safest move is to run your numbers both ways before you file — or simply 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?
Yes, if you are salaried. You can choose your regime fresh every year when you file your return. Business owners have less freedom — if you opt out of the new regime, you can switch back only once in your lifetime. So for founders and business owners, this choice matters a lot more.
What if I do not make a choice?
Then the new regime applies to you automatically. Since FY 2024–25 it is the default. So if you do not tell your employer for TDS, or do not pick the old regime while filing, the government simply puts you in the new regime.
Are any deductions available in the new regime?
Yes, but only a few. You still get your employer's NPS contribution (Section 80CCD(2)), the standard deduction of ₹75,000 for salaried employees, and some Section 10 allowances for specific cases. The popular ones — 80C, 80D, HRA and home-loan interest — are not allowed in the new regime.
Does the ₹12 lakh rebate apply to capital gains?
No, it does not. The Section 87A rebate only applies to income taxed at the normal slab rates. Profits like short-term or long-term capital gains are taxed at their own special rates, so the rebate does not cover them.
Does the regime choice affect my advance tax?
Yes, it does. When you pay advance tax, you must use the slabs of the regime you have chosen. If you use the wrong table, you may underpay and end up paying interest under Section 234C. So fix your regime first, then calculate.
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.
Regime comparison worksheet
A simple sheet to list every deduction you can claim and see the old-vs-new gap at a glance.
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.