Old vs New Tax Regime FY 2025-26: Which Is Better for You

The old tax regime is the original income tax structure, with higher slab rates but full access to deductions and exemptions such as 80C, 80D, HRA, and home loan interest. It became optional, not default, from FY 2023-24.

The new tax regime has lower slab rates than the old regime but removes most deductions, leaving mainly the standard deduction and employer NPS contributions. It has been the default regime since FY 2023-24, so you must actively opt for the old regime if you want it.

The new regime, for almost everyone. At Rs 10 lakh salary, taxable income after the Rs 75,000 standard deduction is Rs 9.25 lakh, under the Rs 12 lakh Section 87A threshold, so tax is nil under the new regime. The old regime would need over Rs 4.5 lakh in deductions just to reach zero, which is unrealistic for most salaried employees.

The new regime. After the Rs 75,000 standard deduction, taxable income is Rs 11.75 lakh, still under the Rs 12 lakh threshold for the full Section 87A rebate, so tax is nil.

It depends on your deductions. If your total deductions (80C, 80D, HRA, home loan interest, and others) exceed roughly Rs 5.44 lakh, the old regime saves more. Below that level, the new regime wins.

The old regime only wins if your total deductions exceed roughly Rs 7.08 lakh. Most salaried employees, even with an active 80C investment and health insurance, fall well short of that, making the new regime the better default at this income.

The old regime becomes competitive only once deductions exceed roughly Rs 8 lakh. Below that, the new regime's lower slab rates outweigh the deductions you would give up.

Under the new regime, the rebate is up to Rs 60,000, making taxable income up to Rs 12 lakh fully tax-free. Under the old regime, the rebate is up to Rs 12,500, covering taxable income up to Rs 5 lakh.

Salaried individuals without business income can switch every year simply by choosing at the time of filing. Taxpayers with business income can switch from new to old only once in their lifetime, and once they move back to the old regime, they cannot return to the new regime again unless the business income stops.

Section 80C (up to Rs 1.5 lakh), HRA exemption, self-occupied home loan interest under Section 24(b), Section 80D health insurance premiums, and Section 80CCD(1) employee NPS contributions are all unavailable under the new regime. The standard deduction and employer NPS contribution under Section 80CCD(2) remain available.

The new regime allows a Rs 75,000 standard deduction against salary income. The old regime allows Rs 50,000. Both apply automatically to salaried employees and pensioners, with no conditions or proof required.

No. House Rent Allowance exemption, along with the Section 80GG rent deduction for those without HRA, is available only under the old tax regime.

Only for a let-out property, where the full interest offsets rental income under either regime. For a self-occupied property, the Rs 2 lakh interest deduction under Section 24(b) is available only under the old regime.

Capital gains tax rates are largely the same under both regimes, since they depend on the asset type and holding period, not the regime chosen. The regime choice mainly affects your salary and other slab-rate income; Section 80C investment deductions, however, are available only under the old regime.

The same slab rates and regime choice apply to NRIs and residents for Indian-sourced income like salary and capital gains. A few provisions, such as Section 80TTB, differ, but most of the regime comparison logic carries over unchanged.

Marginal relief caps your tax at the amount by which your taxable income exceeds Rs 12 lakh, whenever that is less than the tax the slabs would otherwise produce. It exists so that crossing the Rs 12 lakh rebate threshold by a small amount does not create a disproportionately large tax bill.

It depends on your income: roughly Rs 5.44 lakh at Rs 15 lakh income, Rs 7.08 lakh at Rs 20 lakh income, and Rs 8 lakh at Rs 25 lakh income. Below Rs 12 lakh income, the new regime wins regardless of deductions, since tax is already nil.