New Tax Regime —
Zero Tax up to Rs 12.75 Lakh
The new-regime slabs for FY 2025-26, the enhanced Section 87A rebate, the Rs 75,000 standard deduction, exactly which deductions you lose, and how to decide between the new and old regime.
The new tax regime is the default from FY 2023-24 under Section 115BAC. For FY 2025-26 (AY 2026-27) the Budget 2025 slabs are nil up to Rs 4 lakh, rising in steps to 30% above Rs 24 lakh. A Section 87A rebate of up to Rs 60,000 makes total income up to Rs 12 lakh tax-free; with the Rs 75,000 standard deduction, a salaried person earning up to Rs 12.75 lakh pays zero tax. The trade-off: almost all deductions and exemptions — 80C, 80D, HRA, home-loan interest — are not available in the new regime.
Since FY 2023-24 the new regime applies automatically unless you actively choose the old regime. Salaried taxpayers (no business income) can switch each year at ITR filing; those with business income can move to the old regime only once. Codified as Section 115BAC and carried into the Income-tax Act, 2025 (w.e.f. AY 2026-27).
New Tax Regime Slabs — FY 2025-26 (AY 2026-27)
These slabs apply to the total income of resident individuals under the new regime. The basic exemption was raised from Rs 3 lakh to Rs 4 lakh with effect from 1 April 2025. See our income-tax slabs page for the old-regime rates.
| Income slab | Rate | Tax on slab | Cumulative tax |
|---|---|---|---|
| Up to Rs 4,00,000 | Nil | Rs 0 | Rs 0 |
| Rs 4,00,001 – Rs 8,00,000 | 5% | Rs 20,000 | Rs 20,000 |
| Rs 8,00,001 – Rs 12,00,000 | 10% | Rs 40,000 | Rs 60,000 |
| Rs 12,00,001 – Rs 16,00,000 | 15% | Rs 60,000 | Rs 1,20,000 |
| Rs 16,00,001 – Rs 20,00,000 | 20% | Rs 80,000 | Rs 2,00,000 |
| Rs 20,00,001 – Rs 24,00,000 | 25% | Rs 1,00,000 | Rs 3,00,000 |
| Above Rs 24,00,000 | 30% | — | Rs 3,00,000 + 30% of excess |
Add 4% Health & Education Cess on the tax. Surcharge applies on higher incomes — but the new regime caps it at 25% (the 37% surcharge is removed). Rebate u/s 87A up to Rs 60,000 makes income up to Rs 12 lakh tax-free.
The Section 87A rebate applies only when total income is Rs 12 lakh or less. Just above it, tax becomes payable on the slabs — but marginal relief ensures the extra tax does not exceed the income above Rs 12 lakh. Special-rate income such as capital gains does not get the 87A rebate.
New vs Old Tax Regime — Which Is Better?
There is no universal winner. The new regime gives lower rates plus a larger rebate and standard deduction but strips out deductions; the old regime keeps 80C, 80D, HRA and home-loan interest but taxes at higher rates from a Rs 2.5 lakh exemption.
Old regime — deductions available
- Basic exemption Rs 2.5 lakh; 87A rebate up to Rs 5L income
- Full 80C (Rs 1.5L), 80D, 80CCD(1B), HRA, LTA
- Home-loan interest u/s 24(b) up to Rs 2 lakh
- Standard deduction Rs 50,000 (salaried)
- Best when total deductions are large (Rs 3L+)
New regime (default) — simpler, lower rates
- Basic exemption Rs 4 lakh; 87A rebate up to Rs 12L income
- Standard deduction Rs 75,000 (salaried)
- Salary up to Rs 12.75 lakh effectively tax-free
- Only 80CCD(2) employer NPS & 80JJAA allowed
- Best with few deductions or income ≤ Rs 12.75L
New regime usually wins if
- Your total deductions are modest (under ~Rs 2.5–3 lakh)
- Your income is at or below Rs 12.75 lakh (salary)
- You are a young earner not locked into 80C investments
- You value simpler filing over deduction-hunting
Old regime may win if
- You claim HRA + home-loan interest (Rs 2L) + 80C (Rs 1.5L) + 80D
- Your combined deductions cross roughly Rs 4–5 lakh
- You are in the 20–30% band with large, genuine deductions
- You are already committed to PPF, LIC or a home-loan EMI
Not sure which regime saves you more? Run both side by side.
Old vs New calculator →Deductions in the New Tax Regime
The new regime replaces most deductions with a higher rebate and standard deduction. Tax-saving sections such as 80C, 80D and home-loan interest mostly need the old regime — in the new regime you rely on the enhanced 87A rebate and Rs 75,000 standard deduction instead.
| Deduction / exemption | New regime | Old regime |
|---|---|---|
| Standard deduction (salaried) | Rs 75,000 | Rs 50,000 |
| Section 87A rebate | Up to Rs 60,000 (income ≤ 12L) | Up to Rs 12,500 (income ≤ 5L) |
| 80CCD(2) — employer NPS | Yes (up to 14%) | Yes (up to 10%) |
| 80JJAA — new employment | Yes | Yes |
| Section 80C (PPF/ELSS/LIC) | No | Up to Rs 1.5L |
| Section 80D — health insurance | No | Rs 25k–Rs 1L |
| Home-loan interest u/s 24(b) | No* | Rs 2L self-occupied |
| HRA / LTA exemption | No | Yes |
| 80CCD(1B) — extra NPS Rs 50k | No | Yes |
| 80TTA / 80TTB — savings interest | No | Yes |
* Home-loan interest on a let-out property can still be set off against that property's income in the new regime, but the Rs 2 lakh self-occupied benefit is old-regime only.
If you rely on the Rs 2 lakh home-loan interest deduction u/s 24(b), 80C principal, 80EE/80EEA first-home interest or stamp-duty relief, those work only under the old regime. Compare the total old-regime deduction against the new regime's lower rates before you decide. See our home-loan interest deduction guide.
New Regime — Tax on a Rs 15 Lakh Salary
Here is the new-regime tax for a salaried person, after the Rs 75,000 standard deduction. Because taxable income exceeds Rs 12 lakh, the 87A rebate does not apply and normal slab tax is due.
Salary Rs 15 lakh
Salary Rs 12.75 lakh
Slab tax on Rs 14.25 lakh = 5% of (8L–4L) + 10% of (12L–8L) + 15% of (14.25L–12L) = Rs 20,000 + Rs 40,000 + Rs 33,750 = Rs 1,02,750. Use our income-tax calculator to check your own figure.
Want us to compute both regimes and file the return that saves you most?
Get ITR Filing Help →New Tax Regime — Frequently Asked Questions
Related TaxClue Services
Next in this income-tax cluster
New or Old Regime — File the One That Saves You Most
Our CA-led team computes your tax under both regimes, factors in every eligible deduction, and files your ITR accurately — so you never overpay by picking the wrong regime. 100% online, across India.