What Changed?
Starting FY 2023-24, the Government of India made the new tax regime the default for all taxpayers. You can still opt for the old regime, but you must actively choose it while filing. For FY 2025-26, the new regime was further sweetened with revised slabs and a higher basic exemption.
The fundamental difference is simple: the old regime has higher tax rates but allows 70+ deductions and exemptions (80C, 80D, HRA, LTA, standard deduction, home loan interest). The new regime has lower slab rates but removes most deductions, making it simpler to file.
New Regime Tax Slabs (FY 2025-26)
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Standard deduction of ₹75,000 is allowed in the new regime. Rebate under Section 87A is available for taxable income up to ₹12,00,000 (effective tax = zero up to approximately ₹12,75,000 of gross salary).
Old Regime Tax Slabs (FY 2025-26)
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Key Deductions Available Only in Old Regime
- Section 80C (up to ₹1.5 lakh): PPF, ELSS, EPF, life insurance, SCSS, SSY, NSC, tuition fees, home loan principal
- Section 80D (up to ₹75,000): Health insurance premium for self, family, and parents
- HRA Exemption: Based on actual rent paid, salary, and city (metro vs non-metro)
- Section 24(b): Home loan interest deduction up to ₹2 lakh for self-occupied property
- Section 80CCD(1B): Additional ₹50,000 deduction for NPS contribution
- LTA, professional tax, standard deduction (₹50,000)
Break-Even Analysis: When Does Old Regime Win?
The old regime becomes more tax-efficient when your total deductions are high enough to offset the slab rate difference. As a rule of thumb:
- CTC below ₹10 lakh: New regime almost always wins (even without deductions, tax is zero or minimal)
- CTC ₹10–15 lakh: Old regime wins only if deductions exceed ₹3.5–4 lakh (80C + 80D + HRA combined)
- CTC ₹15–25 lakh: Old regime wins if deductions exceed ₹4.5–5.5 lakh
- CTC above ₹25 lakh: Old regime usually wins if you claim HRA + 80C + 80D + home loan interest
The exact break-even depends on your specific salary structure. Use the Income Tax Calculator to compare both regimes with your actual salary, deductions, and exemptions.
Who Should Choose What?
New regime is better for:
- Young professionals without home loans, rent receipts, or insurance policies
- People who do not invest ₹1.5 lakh under 80C or do not pay health insurance
- Anyone who wants simplicity — no need to collect proofs or submit declarations to HR
Old regime is better for:
- Salaried employees paying rent in metros (HRA exemption alone can be ₹1.5–3 lakh)
- People with active home loans claiming both principal (80C) and interest (Section 24) deductions
- Individuals who maximise 80C (₹1.5 lakh) + 80D (₹50,000+) + NPS (₹50,000)
Important Notes
- Salaried employees can switch between regimes every year. Business owners choosing old regime cannot switch back easily.
- Surcharge and 4% health and education cess apply on top of the basic tax in both regimes.
- Always verify the latest slabs from the official Income Tax Department portal before filing. Rules may change in Union Budget announcements.
Use the 80C Tax Saving Calculator to plan your deductions and see which regime saves more for your specific situation.