For FY 2025-26 (AY 2026-27) the new tax regime is the default — it has lower slab rates, a Rs 75,000 standard deduction for salary and a full rebate up to Rs 12 lakh taxable income (Rs 12.75 lakh with the standard deduction), but it removes almost all deductions. The old regime keeps 80C, 80D, HRA and home-loan interest but taxes at higher rates. As a rule of thumb, the old regime wins once your total deductions cross roughly Rs 3.75 lakh at higher incomes — below that the new regime usually saves more.
The regime structure earlier sat in Section 115BAC of the Income-tax Act, 1961. From AY 2026-27 it is carried into the new Income-tax Act, 2025. The slabs, the Rs 12 lakh rebate and the Rs 75,000 standard deduction are unchanged — only the section numbering has moved.
Old vs New Regime — Slab Rate Comparison
The new regime spreads income across seven slabs topping out at 30% only above Rs 24 lakh; the old regime reaches 30% at just Rs 10 lakh. Rates below are for FY 2025-26 (AY 2026-27), before surcharge and 4% cess.
| Income slab | Old regime | New regime |
|---|---|---|
| Up to Rs 2,50,000 | Nil | Nil |
| Rs 2,50,001 – Rs 4,00,000 | 5% | Nil |
| Rs 4,00,001 – Rs 8,00,000 | 20%* | 5% |
| Rs 8,00,001 – Rs 12,00,000 | 20%* | 10% |
| Rs 12,00,001 – Rs 16,00,000 | 30%* | 15% |
| Rs 16,00,001 – Rs 20,00,000 | 30% | 20% |
| Rs 20,00,001 – Rs 24,00,000 | 30% | 25% |
| Above Rs 24,00,000 | 30% | 30% |
* Old regime: 5% up to Rs 5L, 20% on Rs 5L–10L, 30% above Rs 10L. New-regime rebate u/s 87A makes tax nil up to Rs 12L taxable income (Rs 12.75L salaried, after the Rs 75k standard deduction).
The Section 87A rebate that zeroes tax up to Rs 12 lakh taxable income applies to the new regime. Under the old regime the 87A rebate is limited to Rs 5 lakh taxable income (Rs 12,500). This single feature is why the new regime wins for most salaried earners up to about Rs 12.75 lakh.
Which Deductions Survive in Each Regime?
The old regime's advantage is its long list of deductions and exemptions. The new regime trades almost all of them for lower rates and the higher standard deduction.
| Deduction / Exemption | Old regime | New regime |
|---|---|---|
| Standard deduction (salary) | Rs 50,000 | Rs 75,000 |
| Section 80C (PPF, ELSS, EPF, LIC) | Up to Rs 1,50,000 | Not available |
| Section 80D (health insurance) | Up to Rs 1,00,000 | Not available |
| HRA exemption | Available | Not available |
| Home-loan interest (Sec 24b) | Up to Rs 2,00,000 | Not available |
| Employer NPS (Sec 80CCD(2)) | Up to 14% of salary | Up to 14% |
| LTA, 80E, 80G, professional tax | Available | Not available |
| Section 87A rebate | Up to Rs 5L income | Up to Rs 12L income |
Only the employer NPS contribution (80CCD(2)) and 80JJAA survive into the new regime; the higher standard deduction and the Rs 12L rebate are new-regime perks.
Old regime — deduction-rich
- Full Rs 1.5L 80C + Rs 50k NPS (80CCD(1B))
- 80D health, HRA, LTA, 80G donations
- Home-loan interest up to Rs 2 lakh
- Best when deductions are large (rent + loan + 80C)
New regime (default) — low rates
- Nil tax up to Rs 12L taxable income (87A)
- Standard deduction Rs 75,000 for salary
- Lower slab rates across the board
- Best with few deductions or lower income
Not sure which regime saves you more with your actual numbers?
Compare with an expert →What Is the Break-Even Deduction?
The break-even is the total-deduction level at which tax is the same under both regimes. Claim more than this and the old regime saves tax; claim less and the new regime wins. Approximate figures for FY 2025-26:
| Gross income | Break-even deduction (approx.) | Better regime |
|---|---|---|
| Rs 10,00,000 | Rs 2,00,000 | New if deductions < Rs 2.00L |
| Rs 15,00,000 | Rs 3,50,000 | New if deductions < Rs 3.50L |
| Rs 20,00,000 | Rs 3,75,000 | New if deductions < Rs 3.75L |
| Rs 25,00,000 | Rs 4,25,000 | New if deductions < Rs 4.25L |
| Rs 50,00,000 | Rs 4,25,000 | New if deductions < Rs 4.25L |
Indicative only; exact figures vary with salary/standard-deduction mix and surcharge. Use a calculator for your own numbers.
Here is a worked comparison for a salaried person earning Rs 15 lakh, once with modest deductions and once with heavy deductions.
Rs 15L · low deductions
Rs 15L · high deductions
Figures are illustrative (incl. cess) and rounded — see our income-tax slabs page for the exact rate that applies to your income.
Stay on the OLD regime if
- You claim HRA and rent in a metro
- You have a home loan with big interest (up to Rs 2L)
- You max Section 80C and pay 80D health premiums
- Your total deductions clearly exceed the break-even
Pick the NEW regime if
- Your deductions are modest or nil
- Income is up to Rs 12.75L salaried — zero tax via rebate
- You have no HRA, home loan or big 80C
- You want simpler filing with fewer computations
How to Switch Between Old and New Regime
- Salaried (no business income): you may choose a regime afresh every year and can even switch at ITR-filing time if your final choice differs from what you told your employer.
- Business / professional income: the new regime is default; if you opt out to the old regime you can return to the new one only once, so choose carefully (Form 10-IEA).
Do not buy tax-saving investments and only then discover the new regime saves you more. If your deductions are modest, the new regime's lower rates and Rs 75,000 standard deduction can beat the old regime even without 80C. Compare first, invest second.
Want us to compute both regimes and file the one that saves more?
Get ITR Filing Help →Old vs New Regime — Frequently Asked Questions
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