Old vs new tax regime for FY 2025-26 - which saves more?
From FY 2023-24, the new regime is the default for salaried taxpayers, and Union Budget 2025 widened its slabs even further. But the old regime is not gone - and for taxpayers who claim substantial deductions, it can still work out better. Here is how to decide.
By Aditi Menon·Editor-in-Chief·reviewed by editor
Last updated: 15 June 2025
Quick recap: how the two regimes differ
| Feature | New regime | Old regime |
|---|---|---|
| Standard deduction | Rs 75,000 | Rs 50,000 |
| Basic exemption | Rs 4,00,000 | Rs 2,50,000 |
| Highest slab starts at | Rs 24 lakh (30%) | Rs 10 lakh (30%) |
| Section 87A rebate up to | Rs 12 lakh taxable | Rs 5 lakh taxable |
| 80C, 80D, HRA, home loan interest | Not available | Available in full |
| 80CCD(2) employer NPS | Available (up to 14% of basic) | Available (up to 10% of basic) |
| Default from FY 2023-24 | Yes | Opt-in |
Worked examples - four salary bands (FY 2025-26, illustrative)
These are illustrative computations. Actual tax depends on your specific deductions, and cess at 4% is added to all figures below.
- Rs 10 lakh gross salary, no home loan, Rs 1.5L 80C + Rs 25k 80D: New regime tax ~ Rs 45,000 vs old regime tax ~ Rs 51,000. New regime wins by Rs 6,000.
- Rs 15 lakh gross salary, no home loan, Rs 1.5L 80C + Rs 25k 80D + Rs 1L HRA: New regime tax ~ Rs 1,05,000 vs old regime tax ~ Rs 1,50,000. New regime wins by Rs 45,000.
- Rs 20 lakh gross salary, home loan interest Rs 2L, Rs 1.5L 80C + Rs 50k 80D + Rs 2.4L HRA + Rs 50k NPS: New regime tax ~ Rs 2,25,000 vs old regime tax ~ Rs 1,72,000. Old regime wins by Rs 53,000.
- Rs 30 lakh gross salary, home loan interest Rs 2L, full 80C + 80D + HRA Rs 3L + Rs 50k NPS: New regime tax ~ Rs 5,25,000 vs old regime tax ~ Rs 4,68,000. Old regime wins by Rs 57,000.
Simple decision rules
- If your total deductions (80C + 80D + HRA + home loan interest + NPS) are LESS than the difference in slab-based tax between the regimes, choose the new regime.
- A rough thumb rule for FY 2025-26: if your total available deductions are below Rs 4 lakh, the new regime wins. Above Rs 4.5-5 lakh, the old regime wins. In between it is close - run the numbers.
- If your income is below Rs 12.75 lakh (gross), the new regime is almost always the answer because the 87A rebate makes your tax zero after standard deduction.
- If you have a home loan on self-occupied property, you get a Rs 2L interest deduction only under the old regime - this alone tilts the maths for many mid-income salaried filers.
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How to actually switch regimes at ITR filing time
When you file ITR-1 on incometax.gov.in, the form asks which regime you want to use for that assessment year. Tick the correct option; the portal will auto-compute tax under that regime. If your employer has been deducting TDS under the wrong regime through the year, the mismatch is settled at ITR - you either get a refund or a demand notice. Salaried filers with no business income can change this election every single year.
Frequently Asked Questions
Sources & references
- Union Budget 2025 - Finance Bill — Ministry of Finance, GoI
- Income Tax India - regime FAQ — Income Tax Department
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