Quick answers
- Default — the new tax regime under Section 115BAC is the default; you opt out if you want the old.
- Slabs — the new regime has lower slab rates but minimal deductions.
- Old regime — claim 80C, 80D, HRA and home loan interest but pay higher slab rates.
- Standard deduction — Rs 75,000 in the new regime (FY 2025-26 onwards); Rs 50,000 in the old.
- Rebate — Section 87A makes income up to Rs 7 lakh tax-free under the new regime.
What are the old and new tax regimes?
The old tax regime allows deductions and exemptions (HRA, LTA, 80C, 80D, home loan interest) but applies higher slab rates. The new tax regime under Section 115BAC of the Income-tax Act, 1961 offers lower slab rates and a higher rebate, but most deductions are not available.
From AY 2024-25 onwards, the new regime is the default. Taxpayers without business income can switch every year; those with business income must file Form 10-IEA to opt out of the new regime.
Slab comparison (FY 2025-26)
| Income slab (Rs) | Old regime | New regime |
|---|---|---|
| Up to 2.5 lakh | Nil | Nil (up to Rs 3 lakh) |
| 2.5 lakh - 5 lakh | 5% | 5% (3-7 lakh) |
| 5 lakh - 10 lakh | 20% | 10% (7-10 lakh) |
| 10 lakh - 12 lakh | 30% | 15% (10-12 lakh) |
| 12 lakh - 15 lakh | 30% | 20% (12-15 lakh) |
| Above 15 lakh | 30% | 30% |
Which deductions survive in the new regime?
- Standard deduction of Rs 75,000 for salaried and pensioners.
- Employer's NPS contribution under Section 80CCD(2).
- Family pension deduction up to Rs 25,000.
- Section 87A rebate making income up to Rs 7 lakh tax-free.
Old vs new — break-even examples
| Profile | Better regime |
|---|---|
| Salary Rs 7 lakh, no investments | New |
| Salary Rs 10 lakh, full 80C + 80D + HRA | Old |
| Salary Rs 15 lakh, home loan + 80C | Old |
| Salary Rs 20 lakh, no significant deductions | New |
| Senior citizen with FD interest, no investments | New |
Common mistakes to avoid
- Sticking with the old regime out of habit — re-evaluate every year as deductions shrink.
- Forgetting to file Form 10-IEA — business taxpayers must file it to opt out of the new regime.
- Comparing only slab rates — the rebate and standard deduction often flip the verdict.
- Ignoring surcharge changes — the new regime caps the highest surcharge at 25% vs 37% in old.
Key takeaways
- The new regime is the default; opt for old via the ITR (or Form 10-IEA for business income).
- New regime — lower rates, Rs 7 lakh rebate, minimal deductions.
- Old regime — higher rates but 80C, 80D, HRA, home loan interest available.
- Standard deduction is Rs 75,000 in the new regime vs Rs 50,000 in the old.
- The right regime depends on deductions; salaried can switch every year, business cannot.
Frequently asked questions
- Which regime is better, old or new? Depends on your deductions. If you claim 80C, 80D and HRA, the old regime often wins; otherwise the new regime is usually cheaper.
- Is the new regime mandatory? It is the default — you have to actively opt out for the old regime.
- Naya regime ya purana, kaunsa better hai? It depends on your deductions; calculate both before filing.
- Can I switch between regimes every year? Yes if you have no business income; business income taxpayers must file Form 10-IEA and can switch only once.
- What deductions are allowed in the new regime? Standard deduction of Rs 75,000, employer NPS contribution under 80CCD(2), family pension, and Section 87A rebate.
- What is the rebate under Section 87A in the new regime? Income up to Rs 7 lakh effectively pays zero tax in the new regime.
- Is HRA exemption available in the new regime? No. HRA is only available under the old regime.
- Does the standard deduction apply in both regimes? Yes — Rs 75,000 (new) and Rs 50,000 (old).
Old tax regimeNew tax regimeSection 115BACAY 2026-27
About the author
Ganesh
Senior Advisor at Regikart. Want to discuss this in the context of your business?
