Since FY 2020-21, India has had two parallel income tax regimes — the Old Tax Regime (with deductions) and the New Tax Regime (lower rates, no deductions). From FY 2023-24, the New Tax Regime became the default regime. Unless you specifically opt out and choose the Old Regime, the New Regime applies automatically.
New Tax Regime — Slabs for FY 2025-26 (AY 2026-27)
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4–8 lakh | 5% |
| ₹8–12 lakh | 10% |
| ₹12–16 lakh | 15% |
| ₹16–20 lakh | 20% |
| ₹20–24 lakh | 25% |
| Above ₹24 lakh | 30% |
Old Tax Regime — Slabs for FY 2025-26
| Income Slab | Rate (General) | Rate (60+ yrs) | Rate (80+ yrs) |
|---|---|---|---|
| Up to ₹2.5L / ₹3L / ₹5L | Nil | Nil | Nil |
| ₹2.5L–5L | 5% | 5% | Nil |
| ₹5L–10L | 20% | 20% | 20% |
| Above ₹10L | 30% | 30% | 30% |
Who Benefits from the New Regime?
New Regime is better when:
Old Regime is better when:
- ▸Your 80C, HRA, 80D deductions total less than ₹3–4 lakh
- ▸You are a young employee with no home loan or minimal investments
- ▸You prefer simplicity over tax planning
- ▸Your income is ≤ ₹12 lakh (zero tax with 87A rebate)
- ▸You claim HRA + home loan interest + 80C + 80D + NPS
- ▸Total deductions exceed ₹4–5 lakh
- ▸You have a home loan with high interest component
- ▸You have significant insurance and investment commitments
Tax Comparison — Practical Example
Salary: ₹15 lakh per year
Old Regime with deductions:
New Regime (no deductions):
Old regime saves ₹39,520 for this person.
- ▸Standard deduction: -₹50K → ₹14.5L
- ▸80C: -₹1.5L → ₹13L
- ▸80D health insurance: -₹25K → ₹12.75L
- ▸HRA exemption: -₹1.2L → ₹11.55L
- ▸Home loan interest: -₹2L → ₹9.55L
- ▸Tax on ₹9.55L ≈ ₹1,09,500 + cess ≈ ₹1,13,880
- ▸Standard deduction: -₹75K → ₹14.25L
- ▸Tax on ₹14.25L ≈ ₹1,47,500 + cess ≈ ₹1,53,400
How to Switch Between Regimes
Salaried employees: Inform your employer at the beginning of the year via Form 12BB. You can switch once per year.
Business owners / freelancers: Can switch from new to old regime only once in a lifetime. Cannot switch back after opting for old regime once (for business income). Choose carefully.
Conclusion
For most salaried employees with a home loan, significant LIC/ELSS investments, and HRA — the Old Regime saves more. For those with minimal deductions or income ≤ ₹12 lakh — the New Regime is superior. Use our calculator or contact Biswa Corporate Solutions for personalised tax regime analysis.
