Old vs New Tax Regime: Which is Better for FY 2025-26?
Complete comparison of India's tax regimes. Find which saves you more tax.
Choosing the wrong tax regime can cost you tens of thousands of rupees. For FY 2025-26, the new regime is now the default — but for many salaried employees with home loans or significant 80C investments, the old regime still wins. Here is how to decide.
What Changed in FY 2025-26
The new tax regime was updated in the Union Budget 2024. Key changes: the standard deduction for salaried employees was raised from ₹50,000 to ₹75,000 under the new regime. The basic exemption limit under the new regime remains ₹3 lakh. Under Section 87A, income up to ₹7 lakh in the new regime attracts zero tax (after the rebate). The new regime is now the default — you must actively opt for the old regime when filing your ITR or declaring to your employer.
Old regime slabs remain: Nil up to ₹2.5 lakh, 5% up to ₹5 lakh, 20% up to ₹10 lakh, 30% above ₹10 lakh. The old regime allows nearly all deductions (80C, 80D, HRA, home loan interest under 24b, LTA, etc.).
| Income | Rate |
|---|---|
| Up to ₹3 lakh | Nil |
| ₹3–7 lakh | 5% |
| ₹7–10 lakh | 10% |
| ₹10–12 lakh | 15% |
| ₹12–15 lakh | 20% |
| Above ₹15 lakh | 30% |
The Break-Even Point
The new regime wins when your total deductions are low. The old regime wins when your deductions are high. The rough break-even for most salaried taxpayers is around ₹3.75 lakh in total deductions.
This threshold is not fixed — it shifts based on your income level. Higher income earners have a higher break-even deduction amount.
- If your 80C + 80D + HRA + 24(b) deductions total less than ₹3.75 lakh → new regime saves more tax
- If your deductions exceed ₹3.75 lakh → old regime saves more tax
Real Examples with Numbers
Example 1: ₹8 lakh salary, minimal deductions. Old regime: Taxable income = ₹8L − ₹50K standard deduction − ₹1.5L (assumed 80C) = ₹6 lakh. Tax = ₹32,500. New regime: Taxable income = ₹8L − ₹75K standard deduction = ₹7.25 lakh. Tax after 87A = ₹32,500. Roughly equal — but if 80C investments are forced (like EPF), old regime may edge ahead.
Example 2: ₹15 lakh salary, active investor with home loan. Deductions: ₹1.5L (80C) + ₹25K (80D) + ₹2L (home loan interest 24b) + ₹50K (standard deduction) = ₹4.25 lakh. Old regime taxable income: ₹10.75 lakh → tax ≈ ₹1,41,750. New regime taxable income: ₹14.25 lakh → tax ≈ ₹1,56,000. Old regime saves ~₹14,000 here.
Example 3: ₹12 lakh salary, no home loan, minimal deductions. New regime wins clearly — income below ₹12 lakh now attracts 0 tax under the new regime (Budget 2025 update: full rebate on income up to ₹12 lakh in new regime from FY 2025-26).
Use the Calculator
The cleanest way to decide is to plug your exact numbers into the Income Tax Calculator and compare both regimes side by side.
Try it: Income Tax Calculator — Old vs New Regime Comparison → https://calculatordesk.in/income-tax-calculator
Bottom Line
If your income is below ₹12 lakh and you have no major deductions, the new regime now gives you zero tax liability — it wins outright. Above ₹12 lakh, run the actual numbers on your deductions. Home loan + 80C + health insurance together can still tip the balance toward the old regime for those with significant committed investments.
Frequently Asked Questions
Can I switch regime every year?
Salaried employees with no business income can switch freely between old and new regime every year at the time of ITR filing. If you have business income, you can switch only once from new to old regime — after that the choice is locked for subsequent years.
Does the new regime allow any deductions at all?
Very few. The new regime allows the standard deduction (₹75K for salaried), employer NPS contribution under 80CCD(2), and a few others. It disallows HRA, 80C, 80D, home loan interest under 24(b), and most other popular deductions.
What if I forget to declare my regime choice to my employer?
Your employer will default to the new regime from FY 2024-25 onwards. If you want the old regime, inform your employer at the start of the year. You can always switch at ITR filing regardless of what you declared to your employer.