The new tax regime under section 115BAC of the Income-tax Act, 1961 is the default for FY 2025-26 (AY 2026-27), and for most people it now costs less: taxable income up to ₹12 lakh pays no tax. The old regime still wins for some, but only where genuine deductions are large.
This guide sets out both slab tables, what each regime lets you claim, a worked example and the deduction level at which the old regime starts to win. For the slabs alone, see our new tax regime slab explainer. To run both regimes on your own numbers, use our free income tax calculator, or ask for our tax planning service.
Quick answers
- Default: the new regime. You have to opt for the old one.
- Tax-free limit, new regime: taxable income up to ₹12 lakh, through a section 87A rebate of up to ₹60,000.
- Salaried zero-tax point: roughly ₹12.75 lakh, after the ₹75,000 standard deduction.
- Old regime wins: only when your real deductions are large, for most salaries above ₹15 lakh roughly ₹5.5 lakh or more beyond the standard deduction.
- Tax Year 2026-27: the rates are the same as FY 2025-26, as at 25 September 2026.
- Switching: with no business income, choose in each return filed by the due date; with business income, Form 10-IEA and one switch back.
The difference in one line
New regime: lower rates and a bigger rebate, almost no deductions. Old regime: higher rates, with the deductions and exemptions you are used to.
The choice is arithmetic. You pay under whichever regime gives the lower tax on your income and your deductions, so the answer differs from person to person and from year to year.
New regime slabs for FY 2025-26
| Taxable income | Rate |
|---|---|
| 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% |
The basic exemption is ₹4 lakh. Health and education cess of 4% applies on the tax.
Old regime slabs for FY 2025-26
| Taxable income (below 60) | Rate |
|---|---|
| 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 basic exemption is ₹2.5 lakh below 60, and higher for senior and super senior citizens. The section 87A rebate is up to ₹12,500, for taxable income up to ₹5 lakh, and the salaried standard deduction is ₹50,000. Cess of 4% applies here too.
Head to head
| Feature | New regime | Old regime |
|---|---|---|
| Slab rates | Lower, nil up to ₹4 lakh | Higher, nil up to ₹2.5 lakh |
| 80C, 80D, HRA, home loan interest | Mostly not available | Available |
| Standard deduction (salary or pension) | ₹75,000 | ₹50,000 |
| Section 87A rebate | Up to ₹60,000, income up to ₹12 lakh | Up to ₹12,500, income up to ₹5 lakh |
| Default option | Yes | No, you must opt in |
| Best for | Few or modest deductions | Large genuine deductions |
| Paperwork | Lower | Higher: proofs for every claim |
What survives in the new regime
- The standard deduction of ₹75,000 for salaried employees and pensioners.
- The employer's contribution to your NPS account under section 80CCD(2).
- The family pension deduction, up to ₹25,000.
- The section 87A rebate of up to ₹60,000, for taxable income up to ₹12 lakh.
Almost everything else is off the table: 80C, 80D, 80CCD(1B), HRA, LTA and interest on a self-occupied home.
What only the old regime lets you claim
| Section | What it covers | Limit |
|---|---|---|
| 80C | EPF, PPF, ELSS, life insurance, home loan principal, children's tuition fees | ₹1.5 lakh |
| 80D | Health insurance premiums for self, family and parents | Depends on who is covered and their age |
| 24(b) | Home loan interest on a self-occupied house | ₹2 lakh |
| HRA | House rent allowance exemption for salaried tenants | Formula based |
| LTA | Leave travel allowance | Actual travel cost, within the rules |
| 80E | Interest on an education loan | Interest paid, for up to eight years |
| 80G | Donations to eligible institutions | Depends on the institution |
| 80TTA | Savings account interest, below 60 | Capped; we confirm the limit |
| 80TTB | Deposit interest for senior citizens | Capped; we confirm the limit |
| 80CCD(1B) | Your own additional NPS contribution | ₹50,000 |
The section 87A rebate, and what it does not cover
In the new regime the rebate is up to ₹60,000, and it applies where taxable income does not exceed ₹12 lakh. You may still see an older ₹7 lakh figure on some pages; for FY 2025-26 the limit is ₹12 lakh. In the old regime it is up to ₹12,500, for income up to ₹5 lakh.
The salaried zero-tax point
A salaried person in the new regime deducts ₹75,000 as standard deduction, so a salary of about ₹12.75 lakh brings taxable income to ₹12 lakh, and the rebate takes the tax to nil. No old-regime deduction can beat nil, so at or below this salary the new regime wins or ties, whatever you invest.
A worked comparison at ₹12 lakh
Assumptions: salary of ₹12 lakh, ₹1.5 lakh in 80C investments, a ₹25,000 health insurance premium, ₹2 lakh of home loan interest on a self-occupied flat and an HRA exemption of ₹1.2 lakh.
| Step | New regime | Old regime |
|---|---|---|
| Gross salary | ₹12,00,000 | ₹12,00,000 |
| Less: standard deduction | ₹75,000 | ₹50,000 |
| Less: HRA exemption | Not allowed | ₹1,20,000 |
| Less: 80C | Not allowed | ₹1,50,000 |
| Less: 80D | Not allowed | ₹25,000 |
| Less: home loan interest, 24(b) | Not allowed | ₹2,00,000 |
| Taxable income | ₹11,25,000 | ₹6,55,000 |
| Tax on slabs | ₹52,500 | ₹43,500 |
| Less: section 87A rebate | ₹52,500 | Nil (income above ₹5 lakh) |
| Cess at 4% | Nil | ₹1,740 |
| Total tax | Nil | ₹45,240 |
Even with ₹4.95 lakh of deductions, the old regime costs ₹45,240 more here. Illustration only, on the FY 2025-26 slabs.
The break-even deduction level
Above the zero-tax point, the old regime wins only if your deductions are large enough. The table shows, for a salaried person, roughly how much you would need in old-regime deductions and exemptions (80C, 80D, NPS, HRA, home loan interest and so on, on top of the ₹50,000 standard deduction) before the old regime costs less.
| Gross salary | New regime tax (with cess) | Old regime wins if deductions exceed about |
|---|---|---|
| Up to ₹12.75 lakh | Nil | Never: the new regime wins or ties |
| ₹15 lakh | ₹97,500 | ₹5.45 lakh |
| ₹18 lakh | ₹1,50,800 | ₹6.4 lakh |
| ₹20 lakh | ₹1,92,400 | ₹7.1 lakh |
| ₹25 lakh and above | ₹3,19,800 at ₹25 lakh | ₹8 lakh |
Which regime fits your profile
| Profile | Better regime |
|---|---|
| Salary ₹7 lakh, no investments | New: nil tax against about ₹44,200 in the old regime |
| Salary ₹10 lakh, full 80C, 80D and HRA | New: taxable income is under ₹12 lakh, so tax is nil |
| Salary ₹15 lakh, home loan and full 80C | New: ₹97,500 against about ₹1,48,200 in the old regime |
| Salary ₹20 lakh, no significant deductions | New, clearly |
| Salary ₹25 lakh, high rent and HRA, home loan, full 80C and NPS | Possibly old, if total deductions pass about ₹8 lakh |
| Senior citizen with FD interest, no investments | New in most cases; run both for your figures |
The new regime usually suits you if you are young and renting with minimal 80C investments, have no home loan, or prefer higher take-home pay to locking money into 80C instruments. The old regime is worth checking if you pay high rent and claim HRA, service a home loan, and use 80C, 80D and NPS in full.
How to decide, step by step
- Total your income: salary and all other taxable income for the year.
- Add up your real deductions: only what you actually claim, not what you might.
- Compute tax under the new regime, with the ₹75,000 standard deduction.
- Compute tax under the old regime, after your deductions and the ₹50,000 standard deduction.
- Pick the lower figure.
- Record your choice correctly and on time (next section).
How to record your choice
Salaried: select it while filing, and tell your employer for TDS
If you have no business income, you choose the regime in the return itself each year. Tell your employer your choice at the start of the year too, so that TDS on salary is deducted on the right basis. Otherwise you face a lump of tax at filing time, or a refund you wait for. Employers running payroll services collect this declaration in April. See ITR filing for salaried taxpayers.
Business income: Form 10-IEA, and the one switch back
If you have business or professional income, you opt out of the new regime by filing Form 10-IEA by the due date. You get one switch back: once you return to the new regime, you cannot go back to the old one. See ITR filing for business and ITR filing for freelancers.
The old regime needs a return filed by the due date
The old regime is available only in a return filed by the section 139(1) due date. A belated return is taxed under the new regime, whatever you would prefer. See belated, revised and updated returns, and file through our income tax return filing service if you are short of time.
Surcharge at higher incomes
Surcharge is an extra charge on the tax of high-income individuals, and it applies in both regimes. The top surcharge rate is lower in the new regime than in the old, which matters only at very high incomes. We confirm the rate that applies to your income when we run the comparison.
Common mistakes
- Using an old slab table. The FY 2025-26 new regime starts at ₹4 lakh, and the rebate covers income up to ₹12 lakh, not ₹7 lakh.
- Assuming the rebate covers capital gains. It does not.
- Picking a regime out of habit. Recompute every year, because slabs and your deductions change.
- Counting deductions you do not actually make.
- Forgetting Form 10-IEA if you have business income.
- Filing late and losing the old regime.
- Not telling your employer, so TDS is deducted on the wrong basis.
Does this change for Tax Year 2026-27?
FY 2025-26 (AY 2026-27) is under the Income-tax Act, 1961, where the new regime sits in section 115BAC. From Tax Year 2026-27 (1 April 2026 to 31 March 2027) the Income-tax Act, 2025 applies, with new section numbers: the new regime sits in section 202 and the rebate in section 156. As at 25 September 2026, the rates for Tax Year 2026-27 are the same as for FY 2025-26 under both regimes, so the comparison above still holds. Recheck after any Budget change to the slabs or the rebate. See the tax year concept explained.
Key takeaways
- The new regime is the default: nil up to ₹4 lakh, then 5% to 30% in ₹4 lakh steps up to ₹24 lakh.
- The section 87A rebate of up to ₹60,000 makes taxable income up to ₹12 lakh tax-free, but not capital gains.
- A salaried filer pays no tax up to roughly ₹12.75 lakh in the new regime.
- The old regime wins only with large genuine deductions: about ₹5.45 lakh at ₹15 lakh of salary, rising to ₹8 lakh at higher incomes.
- Choose the old regime in a return filed by the due date, or in Form 10-IEA with business income.
Want the comparison run on your numbers?
Our CAs compute your tax both ways before you decide, and file the return in the regime that costs less. See tax planning, or contact us and call or WhatsApp +91 70444 94804. Regikart works from Kolkata (head office), Delhi and Bengaluru and serves 250+ clients across India.
Frequently asked questions
Naya regime ya purana, kaunsa better hai?
Yeh aapke deductions par depend karta hai. ₹12.75 lakh tak ki salary par naya regime hamesha better ya barabar hai, kyunki tax nil hai. Usse upar, purana regime tabhi jeetta hai jab aapke asli deductions kaafi bade hon, jaise ₹15 lakh salary par lagbhag ₹5.45 lakh se zyada. Dono regime mein tax calculate karke hi chunein.
Is income up to ₹12 lakh really tax-free?
In the new regime for FY 2025-26, yes for normal slab income: the section 87A rebate of up to ₹60,000 covers taxable income up to ₹12 lakh, or roughly ₹12.75 lakh of salary. It does not cover capital gains or other special-rate income.
What are the new regime slabs for FY 2025-26?
Nil up to ₹4 lakh; 5% to ₹8 lakh; 10% to ₹12 lakh; 15% to ₹16 lakh; 20% to ₹20 lakh; 25% to ₹24 lakh; and 30% above ₹24 lakh, plus 4% cess.
Which deductions are allowed in the new regime?
The ₹75,000 standard deduction, the employer's NPS contribution under section 80CCD(2), the family pension deduction up to ₹25,000 and the section 87A rebate. 80C, 80D, HRA and home loan interest on a self-occupied house are not.
Does the section 87A rebate apply to capital gains?
No. Income taxed at special rates, such as capital gains and crypto income, is taxed at its own rate even if your total income is below ₹12 lakh.
Can I switch between regimes every year?
With no business income, yes, in each return filed by the due date. With business or professional income, you opt out through Form 10-IEA by the due date and get only one switch back.
Can I choose the old regime in a belated return?
No, if you have no business income. The old regime is available only in a return filed by the section 139(1) due date, so a belated return is taxed under the new regime.
Do I need to tell my employer which regime I want?
Yes. Your employer deducts TDS on salary on the basis of your declared regime. If you do not tell them, TDS follows the default new regime.
Is the standard deduction available in both regimes?
Yes: ₹75,000 in the new regime and ₹50,000 in the old regime for FY 2025-26.
Did Budget 2026 change the slabs?
As at 25 September 2026, no. The rates for Tax Year 2026-27 are the same as FY 2025-26 under both regimes. Recheck after any future Budget.
At what deduction level does the old regime win?
Roughly ₹5.45 lakh of deductions beyond the standard deduction at a ₹15 lakh salary, about ₹7.1 lakh at ₹20 lakh and about ₹8 lakh at higher incomes, on the FY 2025-26 slabs and ignoring surcharge. At or below ₹12.75 lakh of salary it never wins.
About the author
Regikart CA Team
Chartered Accountants at Regikart. Want to discuss this in the context of your business?
