Old vs New Tax Regime: How Salaried Taxpayers Should Compare (FY 2025-26)
Slab rates, the ₹12 lakh rebate, standard deduction and a worked example comparing the old and new income tax regimes for a salaried employee in FY 2025-26.
By Ledgermint Editorial Team · · 2 min read
Key takeaways
- The new regime is the default; it has lower slab rates but allows very few deductions.
- For FY 2025-26, resident individuals with taxable income up to ₹12 lakh pay no tax under the new regime because of the rebate — about ₹12.75 lakh of salary after the ₹75,000 standard deduction.
- The old regime only wins when you have large deductions such as HRA, home-loan interest, Section 80C and 80D.
- Salaried taxpayers without business income can choose the regime each year when filing the return.
- Always compare both — the right answer depends on your own deductions.
Every salaried taxpayer has to choose between the new tax regime (lower rates, few deductions) and the old tax regime (higher rates, many deductions). This guide uses the rates for FY 2025-26 — the income year for returns filed in 2026.
Slab rates for FY 2025-26
| New regime — taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
| Old regime — taxable income (individuals below 60) | 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% |
Health and education cess of 4% is added to the tax in both regimes (surcharge applies at higher incomes).
Key differences
- Standard deduction for salary: ₹75,000 in the new regime; ₹50,000 in the old regime.
- Rebate: in the new regime, a resident individual with taxable income up to ₹12,00,000 gets a rebate of up to ₹60,000, so the tax is nil. In the old regime the rebate applies up to ₹5,00,000 of taxable income.
- Deductions: the old regime allows HRA exemption, Section 80C (up to ₹1,50,000), 80D health insurance, home-loan interest on a self-occupied house (up to ₹2,00,000) and others. Most of these are not available in the new regime.
Worked example: salary of ₹15,00,000
Assume the employee claims ₹1,50,000 under Section 80C and ₹25,000 under Section 80D in the old regime, and has no HRA or home loan.
| New regime | Old regime | |
|---|---|---|
| Gross salary | ₹15,00,000 | ₹15,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| 80C + 80D | — | ₹1,75,000 |
| Taxable income | ₹14,25,000 | ₹12,75,000 |
| Tax on slabs | ₹93,750 | ₹1,95,000 |
| Cess @ 4% | ₹3,750 | ₹7,800 |
| Total tax | ₹97,500 | ₹2,02,800 |
Here the new regime saves over ₹1 lakh. The old regime becomes competitive only when deductions are much larger — typically a combination of high HRA exemption and home-loan interest.
Can you switch every year?
Yes, if you have no business or professional income: you can choose the regime each year while filing your return (and tell your employer at the start of the year so TDS is deducted correctly). Taxpayers with business income can opt out of the new regime but can return to it only once.
Rates in this article apply to FY 2025-26. Rates for later years are set by the Finance Act for that year, and from tax year 2026-27 the provisions sit in the Income-tax Act, 2025. Use this guide for learning and confirm current rules before filing.
Frequently asked questions
Is income up to ₹12 lakh tax-free in the new regime?
Which is better, the old or the new tax regime?
What is the standard deduction in the new tax regime?
Learn this hands-on
- Income Tax Computation — Intermediate, 40 hours, ₹3,500
- ITR Filing (Individual) — Intermediate, 30 hours, ₹3,500
- Personal Finance & Literacy — Beginner, 30 hours, ₹1,200
This article is for general education and is not tax, legal or investment advice. Laws and rates change — confirm current rules with official sources or a qualified professional.