The Old vs New Tax Regime debate centers on tax slabs and deductions. Income up to ₹12 lakh is tax-free under the new regime, due to rebate. Beyond ₹25 lakh, the old regime is better if deductions exceed ₹8 lakh. Between ₹12 – 25 lakh, the choice depends on your deduction level.
Old v/s New Tax Regime – Income Tax Slabs
New Regime Income Tax Slabs FY 2025-26 (AY 2026-27)
The Budget 2025 introduced enhanced income tax slab rates under the new tax regime, thus increasing the basic exemption limit to Rs. 4 lakh and making income above Rs. 24 lakh to be taxed at 30%.
The Income Tax slab rates under the new tax regime applicable for FY 2025-2026 are as follows:
| Income Tax Slabs | Tax Rates |
| Up-to Rs. 4 lakhs | NIL |
| Rs. 4 lakhs – Rs. 8 lakhs | 5% |
| Rs. 8 lakhs- Rs. 12 lakhs | 10% |
| Rs. 12 lakhs – Rs. 16 lakhs | 15% |
| Rs. 16 lakhs – Rs. 20 lakhs | 20% |
| Rs. 20 lakhs – Rs. 24 lakhs | 25% |
| Above Rs. 24 lakhs | 30% |
Budget 2024 has increased the standard deduction under the new tax regime to Rs. 75,000. The family pension deduction has also been increased from Rs. 15,000 to Rs. 25,000. With the revised tax structure the taxpayer will save Rs.17,500.
Income Tax Slabs Under Old Regime FY 2025-26 (AY 2026-27)
The slab rates under the old regime has not changed for the recent financial years. The following slab rates are applicable for individuals aged below 60 years and non-residents.
| New Income Tax Slabs | New Income Tax Rates |
| Up to Rs. 2.5 Lakhs | Nil |
| Rs. 2.5 Lakhs to Rs. 5 Lakhs | 5% |
| Rs. 5 Lakhs to Rs. 10 Lakhs | 20% |
| Above Rs. 10 Lakhs | 30% |
Income Tax Slabs applicable for resident senior citizens aged between 60-80 under the old regime years are given below
| New Income Tax Slabs | New Income Tax Rates |
| Up to Rs. 3 Lakhs | Nil |
| Rs. 3 Lakhs to Rs. 5 Lakhs | 5% |
| Rs. 5 Lakhs to Rs. 10 Lakhs | 20% |
| Above Rs. 10 Lakhs | 30% |
For resident super senior citizens aged above 80 years, the basic exemption limit increases to Rs 5 lakhs.
There is no separate slab benefit for senior citizens under the new tax regime
Old v/s New Tax Regime – Deductions and Exemptions
There are numerous deductions available under the old regime, for which deductions are not available under the new regime. Let us understand how the new tax regime differs from the old regime based on deductions and exemptions.
Rebate
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Persons Eligible for Rebate | Rebate is allowed only for resident individuals whose taxable income is within Rs. 5 lakhs. | Rebate is allowed only for resident individuals whose taxable income is within Rs. 7 lakhs. |
| Maximum Rebate | Rs. 12,500 rebate is allowed. | Rs. 25,000 rebate is allowed. |
| Marginal relief on rebate | Not allowed. | Not allowed. |
Standard Deduction
| Old Tax Regime | New Tax Regime (FY 2024-25) |
| Persons having salary income can claim a standard deduction of Rs. 50,000 under the old regime. | Persons having salary income can claim a standard deduction of Rs. 75,000 under the old regime. |
House Rent
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| House Rent Allowance Exemption u/s Section 10(13A) – for employees receiving HRA | Allowed, subject to limits prescribed | Not available |
| House Rent deduction u/s 80GG – for employees not receiving HRA and self employed taxpayers | Allowed, subject to limits prescribed | Not available |
Home Loan Interest
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Home Loan Interest on Self Occupied Property | Up to Rs. 2 lakh of deduction is allowed | No deduction is allowed |
| Home Loan Interest on Let Out Property | Entire interest can be claimed as a deduction. | Entire interest can be claimed as a deduction. |
| Additional interest under section 80EE | Up to Rs. 50,000 can be claimed as a additional deduction. | No deduction is allowed |
| Additional interest under section 80EEA | Up to Rs. 1,50,000 can be claimed as a additional deduction. | No deduction is allowed |
Chapter VI-A Deductions
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Investment deductions u/s 80C | Up to Rs. 1.5 lakhs can be claimed as a deduction.Popular investments are life insurance policy, ELSS, 5 years fixed deposits, etc. | Not available |
| Employer’s Contribution to National Pension System (NPS) – Section 80CCD(2) | Up to 10% of basic pay allowed | Up to 14% of basic pay allowed |
| Employee’s contribution to Pension Fund (NPS) – Section 80CCD(1) | Allowed up to R. 1.5 lakh limit | Not available |
| Medical insurance premium under section 80D | Up to Rs. 25,000 for self and family.Up to Rs. 25,000 for senior citizens.Up to Rs. 50,000 for senior citizens | Not available |
| Education loan deduction under section 80E | Entire interest can be claimed as a deduction. | Not available |
| Section 80U – Disability | Up to Rs. 1.25 lakhs deduction available | Not available |
| Donations to charitable institutions under section 80G | Deduction available subject to limits prescribed | Not available |
| Donations to political parties u/s 80GGC | Entire donation can be claimed as a deduction. | Not available |
| All contributions to Agniveer Corpus Fund – 80CCH | Allowed | Allowed |
Retirement Benefits
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Exemption on voluntary retirement 10(10C) | Allowed | Allowed |
| Exemption on gratuity u/s 10(10) | Allowed | Allowed |
| Exemption on Leave encashment u/s 10(10AA) | Allowed | Allowed |
Other Deductions
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Leave Travel Allowance (LTA) | Allowed within the limits prescribed | Not available |
| Food allowance | Allowed Rs. 100 per day. | Not available |
| Entertainment Allowance and Professional Tax | Allowed | Not available |
| Perquisites for official purposes | Allowed | Allowed |
| Deduction on Family Pension Income | Max deduction of Rs. 15,000 | Max deduction of Rs. 25,000 |
| Gifts received up to Rs 50,000 | Allowed | Allowed |
| Daily Allowance | Allowed | Allowed |
| Conveyance Allowance | Allowed | Allowed |
| Transport Allowance for a specially-abled person | Allowed | Allowed |
Old v/s New Tax Regime – Other Differences
The significant differences are already explained above. However, the following table describes other differences between the old and new regime in general.
Form 10 IEA Requirements
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Default Regime | Not the default regime | Default tax regime |
| Option to switch | Should choose every financial year. | Not required as it is the default option. |
| Option to switch to old regime for Business income earners | Taxpayers having business income should file Form 10-IEA within the due date. | Not required as it is the default option. |
| Option of switching back to new regime | Taxpayers having business income should file Form 10-IEA within the due date. | Not Applicable |
Other Differences
| Basis of Differentiation | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Documentation | All the deductions applicable should be supported by valid proof documents. | Less documentation as compared to the old regime. |
| Tax Planning Effort | Encourages making more investments, thereby systematic tax planning effort required. | Not much effort on tax planning is required. |
New Tax Regime vs Old Tax Regime FY 2025-26 – Which Is Better?
Choosing between the Old and New Tax Regimes depends on your income level, deductions, and exemptions.
For salaried individuals with minimal deductions, the New Regime is likely more beneficial due to relaxed tax slabs and a rebate up to ₹7 lakh or ₹12 lakh (based on updated 87A provisions).
However, if you claim substantial deductions under Sections 80C, 80D, HRA, or home loan interest, the Old Regime may offer greater tax savings.
Let us understand the most beneficial regime using the following examples:
Example-1
Mr. A, has a salary income of Rs. 10 lakhs. He has investment deductions under section 80C for Rs.1 lakhs and medical insurance premium paid of Rs. 30,000 for his self and family. The computation of taxable income and total tax payable under both the regimes is tabulated below:
| Particulars | New Regime | Old Regime |
| Salary | 10,00,000 | 10,00,000 |
| Less Standard Deduction: | 75,000 | 50,000 |
| Gross Total income | 9,25,000 | 9,50,000 |
| Deductions: Section 80C | Nil | 1,00,000 |
| Section 80D: Insurance Premium | Nil | 25,000 |
| Taxable Income | 9,25,000 | 8,25,000 |
| Tax on Total Income | 0 | 77,500 |
| Cess | 3,100 | |
| Total tax payable including Cess | 0 | 80,600 |
New regime proved to be beneficial, wholly attributable to increased rebate.
Example-2
Mr. A, has a salary income of Rs. 20 lakhs. He has investment deductions as follows:
- Investment deductions under section 80C – Rs.1 lakh
- Medical insurance premium paid of Rs. 30,000 for his self and family.
- Interest on home loan (self occupied property) – Rs. 2,00,000
- Donation to political party – Rs. 2,75,000
- The computation of taxable income and total tax payable under both the regimes is tabulated below:
| Particulars | New Regime | Old Regime |
| Salary | 20,00,000 | 20,00,000 |
| Less Standard Deduction: | 75,000 | 50,000 |
| Loss under House Property | Nil | 2,00,000 |
| Gross Total income | 19,25,000 | 17,50,000 |
| Deductions: Section 80C | Nil | 1,00,000 |
| Section 80D: Insurance Premium | Nil | 25,000 |
| Donation to political party | Nil | 2,75,000 |
| Taxable Income | 19,25,000 | 13,50,000 |
| Tax on Total Income | 1,85,000 | 2,17,500 |
| Cess | 7,400 | 8,700 |
| Total tax payable including Cess | 1,92,400 | 2,26,200 |
In the current example, the new tax regime proved to be more beneficial in spite of to high tax saving deductions, because of the relaxed slab rates.
The Learning: Only a lot of tax saving deductions would make the old regime more beneficial
Note:
- Deduction amount more than the amount specified on column 2 is required to make the old regime the most beneficial. If the deduction amount is less than what is shown in column 2, new regime is the most beneficial.
- The income level here denotes the income net of standard deduction.
The following table summarizes the level of deduction required to make the old regime the most beneficial for you. Please note that the income given here does not include any special tax income, and
Note: First column contains income levels and first row contains deduction amount. The above table applies only for FY 2025-2026.
| Gross Income | Exempt Allowance |
| Up to Rs. 12 lakhs | 0 |
| Rs. 13 lakhs | 6,87,500 |
| Rs. 14 lakhs | 5,18,750 |
| Rs. 15 lakhs | 5,43,750 |
| Rs. 16 lakhs | 5,68,750 |
| Rs. 17 lakhs | 6,08,330 |
| Rs. 18 lakhs | 6,41,670 |
| Rs. 19 lakhs | 6,75,000 |
| Rs. 20 lakhs | 7,08,330 |
| Rs. 22 lakhs | 7,54,170 |
| Rs. 24 lakhs | 7,87,500 |
| Rs. 25 lakhs | 8,00,000 |
Note:
- Deduction amount more than the amount specified on column 2 is required to make the old regime the most beneficial. If the deduction amount is less than what is shown in column 2, new regime is the most beneficial.
- The income level here denotes the income net of standard deduction.
The Better Tax Regime for Investors
- There are a lot of tax saving investments, including insurance schemes, equity, residential real estate and other traditional investments like deposits and retirement fund. If you are want to save taxes through investments, the old regime could be a very good choice for you.
The Better Tax Regime for NRIs
Most of the tax saving deductions are available for NRIs also, except a few deductions like section 80TTB. Therefore, all the popular deductions are available for you like section 80C investments, insurance under section 80D, etc. Therefore even though you are an NRI, you can avail the tax saving deductions under the old regime. The choice of the most beneficial regime depends on your income and deduction level, similar to residents.
New Tax Regime vs Old Tax Regime – Key Takeaways
- To choose between the Old and New Tax Regime, calculate your net taxable income after claiming all eligible exemptions and deductions under the old regime (like HRA, 80C, 80D, etc.). Then, compare the tax liability under both regimes. The regime with lower tax payable is the better choice.
- Salaried individuals should inform their employer of their preferred regime for correct TDS deduction.
- If you have losses from house property, capital gains, or business income, note that under the new regime, such losses cannot be set off or carried forward. This may affect future tax liabilities, so factor it in before making your decision.
The new tax regime is more beneficial for taxpayers with income up to ₹24 lakh who claim few or no deductions, as it offers lower tax rates without exemptions. In contrast, the old tax regime is better suited for high-income earners who claim significant deductions under Section 80C, home loan interest, or insurance premiums, which can reduce taxable income substantially.
The new tax regime benefits individuals with minimal deductions or those who prefer a simpler filing process. On the other hand, the old tax regime is ideal for those who can claim significant deductions and exemptions. Senior citizens, in particular, may benefit more under the old regime through Section 80TTB, which allows a ₹50,000 deduction on interest income.
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