Key points
- The new regime (section 115BAC) is the default; the old regime is optional.
- New regime FY 2025-26: nil up to Rs 4L, then 5/10/15/20/25/30% bands up to above Rs 24L; standard deduction Rs 75,000.
- Old regime: nil up to Rs 2.5L (higher for seniors), 5% / 20% / 30% bands; standard deduction Rs 50,000.
- New regime 87A rebate up to Rs 60,000 (income up to Rs 12L); old regime rebate up to Rs 12,500 (income up to Rs 5L).
- The old regime can win if you have large deductions; otherwise the new regime's lower rates often win. Compare your own numbers.
Since the new regime became the default, the first decision most salaried taxpayers face is: stay on the new regime or opt for the old regime? There is no single right answer — it depends entirely on how many deductions you can claim. This guide lays out the FY 2025-26 numbers and two worked comparisons so you can see the logic.
The slabs, side by side (FY 2025-26)
| New regime (default) | Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 – 8,00,000 | 5% |
| Rs 8,00,001 – 12,00,000 | 10% |
| Rs 12,00,001 – 16,00,000 | 15% |
| Rs 16,00,001 – 20,00,000 | 20% |
| Rs 20,00,001 – 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
| Old regime (below age 60) | Rate |
|---|---|
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 – 5,00,000 | 5% |
| Rs 5,00,001 – 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
In the old regime the basic exemption is higher for resident seniors (Rs 3 lakh for ages 60–79, Rs 5 lakh for 80+). Both regimes add a 4% health and education cess, and a surcharge applies to very high incomes.
Standard deduction and rebate
- Standard deduction (salaried): Rs 75,000 (new) vs Rs 50,000 (old).
- Section 87A rebate: new regime up to Rs 60,000 if total income is up to Rs 12 lakh (with marginal relief just above); old regime up to Rs 12,500 if total income is up to Rs 5 lakh.
- Deductions: the old regime allows many (80C, 80D, home loan interest, HRA and more); the new regime allows very few.
Worked comparison 1: few deductions
A salaried person with gross salary Rs 15,00,000 and only small deductions. In the new regime, taxable income is Rs 15,00,000 − Rs 75,000 = Rs 14,25,000. Tax works out to Rs 93,750 + 4% cess Rs 3,750 = Rs 97,500.
In the old regime, if this person claims the Rs 50,000 standard deduction and, say, Rs 1,50,000 under section 80C, taxable income is Rs 13,00,000. Old-regime tax on Rs 13,00,000 is Rs 12,500 (on the 5% band) + Rs 1,00,000 (on the 20% band) + Rs 90,000 (on the 30% band) = Rs 2,02,500, plus 4% cess Rs 8,100 = Rs 2,10,600. Here the new regime is far cheaper because the deductions are small. (Illustrative figures.)
Worked comparison 2: large deductions
The same Rs 15,00,000 salary, but this person has substantial deductions in the old regime: Rs 50,000 standard deduction, Rs 1,50,000 (80C), Rs 2,00,000 home-loan interest, and Rs 25,000 (80D). Total deductions Rs 4,25,000, so old-regime taxable income is Rs 10,75,000. Tax is Rs 12,500 + Rs 1,00,000 + Rs 22,500 (30% on Rs 75,000) = Rs 1,35,000, plus 4% cess Rs 5,400 = Rs 1,40,400. That is still more than the new regime’s Rs 97,500 in this example — but with even larger deductions the old regime can pull ahead. The point: the answer flips depending on your deductions, so you must compute both. (Illustrative figures.)
How to decide
- List the deductions you can genuinely claim (not hypothetical ones).
- Compute tax under both regimes with those numbers.
- Pick the lower result — and remember the rules can change year to year.
Try the numbers
Not tax advice
Frequently asked questions
- Which regime is better for me?
- It depends on your deductions. If you claim large deductions (such as section 80C, home loan interest, HRA), the old regime may give lower tax. If you have few deductions, the new regime's lower rates and higher rebate often win. The only reliable way is to compute both — use our calculator.
- How do I choose the old regime?
- The new regime is the default. Salaried people without business income can usually choose each year in the return itself. Those with business or professional income have to file Form 10-IEA to opt out, within the due date. Check the current procedure on the Income Tax Department portal.
- Can my tax be zero under the new regime?
- For FY 2025-26, resident individuals with total income up to Rs 12 lakh can have their tax reduced to nil through the section 87A rebate (up to Rs 60,000) in the new regime. The rebate does not apply to income taxed at special rates, and a marginal relief applies just above Rs 12 lakh.
Official sources
- Income Tax Department — Tax slabs for AY 2026-27 (old and new regime) — Slabs, standard deduction, 87A rebate, surcharge, cess
- Income Tax Department e-filing portal — Form 10-IEA and current rules to opt out
Not professional advice