Table of Contents
What Changed in FY 2025-26?
Budget 2024 made the New Tax Regime even more attractive by raising the standard deduction from ₹50,000 to ₹75,000 for salaried employees, and increasing the rebate limit under Section 87A from ₹5L to ₹7L taxable income (making income up to ~₹7.75L effectively tax-free after standard deduction).
Tax Slabs — New vs Old Regime
Here's how the two regimes tax your income differently:
| Income Range | Old Regime Rate | New Regime Rate (FY 2025-26) |
|---|---|---|
| Up to ₹2.5L | Nil | Nil |
| ₹2.5L – ₹4L | 5% | Nil |
| ₹4L – ₹5L | 5% | 5% |
| ₹5L – ₹8L | 20% | 5% |
| ₹8L – ₹10L | 20% | 10% |
| ₹10L – ₹12L | 30% | 15% |
| ₹12L – ₹16L | 30% | 15% |
| ₹16L – ₹20L | 30% | 20% |
| ₹20L – ₹24L | 30% | 25% |
| Above ₹24L | 30% | 30% |
The New Regime has lower slab rates but you give up most deductions. The Old Regime taxes more at each slab but lets you reduce your taxable income significantly through deductions.
Deductions: What You Lose & Keep
This is the crux of the decision. Under the New Regime, most popular deductions are gone:
| Deduction / Exemption | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 ✅ |
| Section 87A Rebate (zero tax limit) | Up to ₹5L income (₹12,500 rebate) | Up to ₹12L income (₹60,000 rebate) ✅ |
| Section 80C (PPF, ELSS, LIC…) | Up to ₹1,50,000 | ❌ Not allowed |
| HRA Exemption (Section 10(13A)) | Available | ❌ Not allowed |
| Section 24(b) Home Loan Interest | Up to ₹2,00,000 | ❌ Not allowed |
| NPS employer contribution (80CCD(2)) | Up to 10% of salary | ✅ Still allowed |
| Section 80D (Medical Insurance) | Up to ₹25,000–₹50,000 | ❌ Not allowed |
| LTA (Leave Travel Allowance) | Available | ❌ Not allowed |
| Section 80E (Education Loan Interest) | Available | ❌ Not allowed |
| Gratuity, VRS, Leave Encashment | Exempt up to limits | ✅ Still exempt |
Breakeven Deduction Level by Salary
The Old Regime becomes better only if your total deductions exceed the "breakeven" level. Here's the breakeven for common salary levels (FY 2026-27):
| Annual Salary (CTC) | Breakeven Deductions Needed | Verdict if You Claim Full 80C + HRA |
|---|---|---|
| ₹6 Lakh | ~₹1,50,000 | Old Regime likely better |
| ₹8 Lakh | ~₹2,00,000 | Old Regime likely better |
| ₹10 Lakh | ~₹2,75,000 | Depends on HRA + home loan |
| ₹12 Lakh | ~₹3,25,000 | Depends on city and rent |
| ₹15 Lakh | ~₹3,75,000 | New Regime often better |
| ₹20 Lakh+ | ~₹4,25,000+ | New Regime often better |
Who Should Choose Which Regime?
✅ Choose Old Regime if…
- →You pay rent and claim HRA
- →You have a home loan with interest > ₹1L/yr
- →You max out 80C investments (₹1.5L)
- →You pay health insurance premiums (80D)
- →Your total deductions exceed breakeven
✅ Choose New Regime if…
- →You don't pay rent or live in own house
- →You have no home loan
- →Your total deductions are below breakeven
- →You want simplicity (fewer documents)
- →Your salary is above ₹15L with few deductions
Can You Switch Every Year?
Salaried employees: Yes, you can switch freely every year. You can choose Old Regime by informing your employer at the start of the financial year, or switch at ITR filing. This gives you maximum flexibility — compare both, pick the better one for that year.
Business / freelance income holders: You can switch from Old to New Regime only once. After switching to New, you cannot go back to Old Regime (except if business income ceases). Plan carefully before switching.
Want to know your exact salary after all deductions? Use our free Payslip Calculator →