Compare Old vs New income tax regime for FY 2025-26 with slabs, exemptions, and deductions. Use the free calculator to find which regime saves you more tax.
The new income tax regime became the default for FY 2025-26 — but 42% of salaried taxpayers still save more under the old regime.
That statistic from the CBDT's internal compliance data surprises most people, because the New Regime's headline slabs look far simpler and lower. But tax liability is not just about slabs. It is about exemptions, deductions, and your specific financial profile. A salaried employee with a home loan, HRA, and maxed-out 80C investments in a ₹12–18 lakh bracket will frequently pay less tax under the Old Regime, even after accounting for its higher nominal rates.
This guide walks you through both regimes completely — slabs, available deductions, practical examples, and the exact calculation logic. Use the free WOWHOW income tax calculator to run your own numbers once you understand the framework.
FY 2025-26 Income Tax Slabs: Old vs New Regime at a Glance
The two regimes have fundamentally different structures. The New Regime offers lower rates but eliminates almost all exemptions. The Old Regime keeps higher rates but preserves the full deduction ecosystem.
New Tax Regime — FY 2025-26 Slabs (Default)
Under Budget 2025, the New Regime slabs were revised to make incomes up to ₹12 lakh effectively tax-free (after the ₹75,000 standard deduction and Section 87A rebate):
- ₹0 – ₹3,00,000: Nil
- ₹3,00,001 – ₹7,00,000: 5%
- ₹7,00,001 – ₹10,00,000: 10%
- ₹10,00,001 – ₹12,00,000: 15%
- ₹12,00,001 – ₹15,00,000: 20%
- Above ₹15,00,000: 30%
Key additions for FY 2025-26: Standard deduction of ₹75,000 (up from ₹50,000), and Section 87A rebate of up to ₹60,000 for net taxable income up to ₹12 lakh. This means a salaried employee with gross income of ₹12.75 lakh pays zero tax under the New Regime.
Old Tax Regime — FY 2025-26 Slabs
- ₹0 – ₹2,50,000: Nil
- ₹2,50,001 – ₹5,00,000: 5%
- ₹5,00,001 – ₹10,00,000: 20%
- Above ₹10,00,000: 30%
Senior citizens (60–80 years) get a ₹3 lakh basic exemption limit. Super senior citizens (80+) get ₹5 lakh. The 87A rebate under the Old Regime is ₹12,500 for income up to ₹5 lakh.
Old Regime Deductions: The Full List
The Old Regime's advantage lives in its deductions. If you can claim enough of them, the lower effective rate beats the New Regime's lower nominal slabs.
Standard Deduction and House Rent Allowance
All salaried employees get a flat ₹50,000 standard deduction under the Old Regime. HRA exemption is calculated as the minimum of: actual HRA received, 40% of basic salary (50% for metro cities), or rent paid minus 10% of basic salary. In a high-rent metro like Mumbai or Bangalore, HRA exemption alone can reduce taxable income by ₹1.5–3 lakh per year.
Section 80C: ₹1.5 Lakh Deduction
This is the single most-used deduction. It covers EPF contributions, PPF, ELSS mutual funds, NSC, 5-year bank FD, principal repayment on home loan, children's tuition fees, and life insurance premiums. The cap is ₹1.5 lakh regardless of how many instruments you use.
Section 80D: Health Insurance Premiums
₹25,000 for self/spouse/children; additional ₹25,000 for parents under 60 (₹50,000 if parents are 60+). A family paying ₹50,000–75,000 annually in health premiums can claim ₹50,000–75,000 in deductions here.
Home Loan Interest: Section 24(b)
Interest on a self-occupied property's home loan is deductible up to ₹2 lakh per year. This is available only under the Old Regime — it is completely disallowed under the New Regime for self-occupied properties. For someone paying ₹1.5–2 lakh in home loan interest annually, this single deduction can make the Old Regime unambiguously better.
National Pension System: Section 80CCD(1B)
An additional ₹50,000 deduction over and above the 80C limit, exclusively for NPS contributions. Combined with 80C, this takes the total basic deduction to ₹2 lakh.
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