Old vs New Tax Regime: Which Saves You More Tax in FY 2025-26
The new tax regime has lower rates but you lose most deductions. Here is exactly who benefits from each.
The short answer
The new tax regime is the default and is usually simpler for employees with modest deductions. The old regime can win when you claim substantial HRA, home-loan interest, insurance, and Section 80C investments. Compare both using your taxable income rather than choosing based only on the headline slab rates.
New tax regime slabs for FY 2025-26
| Taxable income | Rate | | --- | ---: | | Up to ₹3,00,000 | Nil | | ₹3,00,001–₹6,00,000 | 5% | | ₹6,00,001–₹9,00,000 | 10% | | ₹9,00,001–₹12,00,000 | 15% | | ₹12,00,001–₹15,00,000 | 20% | | Above ₹15,00,000 | 30% |
The standard deduction is ₹75,000 for salaried taxpayers. The Section 87A rebate can reduce tax to zero when eligible income is under ₹7,00,000. Surcharge and the 4% health and education cess still need to be considered where applicable.
Old tax regime slabs for FY 2025-26
| Taxable income | 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% |
The old regime offers a ₹50,000 standard deduction and supports more exemptions and deductions. Common claims include 80C up to ₹1,50,000, 80D health insurance up to ₹25,000, HRA exemption, and home-loan interest under Section 24(b) up to ₹2,00,000 for a self-occupied property.
Comparison at common salary levels
The following is an indicative comparison for a salaried person using standard deductions and no extra old-regime deductions. Final tax depends on taxable income, age, cess, surcharge, and declarations.
| Annual salary | New regime | Old regime | | ---: | ---: | ---: | | ₹6,00,000 | ₹0 | ~₹33,800 | | ₹8,00,000 | ~₹31,200 | ~₹75,400 | | ₹10,00,000 | ~₹54,600 | ~₹1,06,600 | | ₹12,00,000 | ~₹85,800 | ~₹1,58,600 | | ₹15,00,000 | ~₹1,45,600 | ~₹2,21,000 | | ₹20,00,000 | ~₹2,96,400 | ~₹3,78,000 |
Treat this table as a planning guide, not a tax return. A large HRA exemption, home-loan interest, and 80C/80D claims can make the old regime more competitive.
Compare both regimes: Use the SalaryScope tax comparison calculator, then check your take-home with the In-Hand Salary Calculator.
Who should choose the new regime?
Choose the new regime when you have limited investments, do not pay enough rent to claim HRA, have no home-loan interest, or prefer simpler payroll declarations. It can also be attractive for people whose employer salary structure already produces taxable income below the rebate threshold.
Who should choose the old regime?
The old regime deserves a calculation when you invest the full ₹1,50,000 under 80C, pay health insurance, pay rent, repay a qualifying home loan, or support other eligible deductions. The more legitimate deductions you can document, the more likely the old regime becomes useful.
How to switch regimes
Salaried employees can usually tell their employer which regime to use for monthly TDS. Your final choice is made in the income-tax return, subject to the rules for business or professional income. Keep rent receipts, investment proofs, insurance statements, and loan certificates if you plan to claim deductions.
Frequently asked questions
Is the new regime always better below ₹7,00,000?
Eligible taxpayers can receive a rebate that makes tax zero below the relevant income threshold. Confirm the definition of total income and rebate eligibility before relying on a headline number.
Can I claim 80C in the new regime?
Most Chapter VI-A deductions, including regular 80C investments, are not available in the new regime. Certain employer contributions and specified deductions remain exceptions.
Can I change my choice later?
Employees can generally choose the regime each financial year when filing their return. TDS selected by an employer is only a withholding estimate; your return reconciles the final liability.
Does standard deduction apply to both regimes?
Yes, the standard deduction applies to salaried taxpayers, but the amount differs: ₹75,000 in the new regime and ₹50,000 in the old regime for FY 2025-26.
Does tax regime change my CTC?
No. It changes the tax withheld from your gross salary and therefore your in-hand pay. Read CTC vs In-Hand Salary for the full salary-breakup explanation.