The Old vs New Tax Regime debate centers on tax slabs and deductions. The Old Regime allows exemptions and deductions like HRA, standard deduction, Section 80C, and 80D, making it suitable for those with high investments. The New Regime offers lower tax rates but removes most deductions. Choosing the better option depends on your income, salary structure, and eligible tax-saving investments.
New Regime Income Tax Slabs FY 2025-26 (AY 2026-27)
The Budget 2025 introduced enhanced income tax slab rates under the new tax regime, thus increasing the basic exemption limit to Rs. 4 lakh and making income above Rs. 24 lakh to be taxed at 30%. The income tax slab for FY 2025-26 (AY 2026-27) is as follows: Income up to Rs. 4 lakh is exempt, Rs. 4 lakh to 8 lakh taxed at 5%, Rs. 8lakh to 12 lakh at 10%, Rs. 12 lakh to 16 lakh at 15%, Rs. 16 lakh to 20 lakh at 20%, Rs. 20 lakh to 24 lakh at 25%, and income above Rs. 24 lakh at 30%.
The Income Tax slab rates under the new tax regime applicable for FY 2025-2026 are as follows:
| Income Tax Slabs | Tax Rates |
| Up-to Rs. 4 lakhs | NIL |
| Rs. 4 lakhs – Rs. 8 lakhs | 5% |
| Rs. 8 lakhs- Rs. 12 lakhs | 10% |
| Rs. 12 lakhs – Rs. 16 lakhs | 15% |
| Rs. 16 lakhs – Rs. 20 lakhs | 20% |
| Rs. 20 lakhs – Rs. 24 lakhs | 25% |
| Above Rs. 24 lakhs | 30% |
Under the new tax regime, the Section 87A rebate has been increased from ₹25,000 to ₹60,000, making income up to ₹12 lakh tax-free. This rebate applies only to income taxed at regular slab rates and not on income taxed at special rates like capital gains under Section 112A. Marginal relief continues to apply if total income slightly exceeds ₹12 lakh.
Check out the beneficial regime for you based on income and deduction level in the table below for FY 2025-26 (AY 2026-27)
| Income | Rs. 0 | Rs. 1.25 lakh | Rs. 2.5 lakh | Rs. 5 lakh | Rs. 6.5 lakh | Rs. 7.15 lakh | Rs. 7.75 lakh | Rs. 8.75 lakh + |
| Rs. 10 lakh | NEW | NEW | NEW | BOTH | BOTH | BOTH | BOTH | BOTH |
| Rs. 13.5 lakh | NEW | NEW | NEW | BOTH | OLD | OLD | OLD | OLD |
| Rs. 17 lakh | NEW | NEW | NEW | NEW | OLD | OLD | OLD | OLD |
| Rs. 20.5 lakh | NEW | NEW | NEW | NEW | NEW | NEW | OLD | OLD |
| Rs. 24 lakh | NEW | NEW | NEW | NEW | NEW | NEW | BOTH | OLD |
| Rs. 27.5 lakh | NEW | NEW | NEW | NEW | NEW | NEW | BOTH | OLD |
| Rs. 31 lakh | NEW | NEW | NEW | NEW | NEW | NEW | BOTH | OLD |
| Rs.34.5 lakh | NEW | NEW | NEW | NEW | NEW | NEW | BOTH | OLD |
| Rs. 35 lakh + | NEW | NEW | NEW | NEW | NEW | NEW | BOTH | OLD |
Note: First column contains income levels and first row contains deduction amount. The above table applies only for FY 2025-2026.
New Regime Income Tax Slabs – FY 2024-25 (AY 2025-26)
The income tax slab for FY 2024-25 (AY 2025-26) is as follows: Income up to Rs. 3 lakh is exempt, Rs. 3 lakh to 7 lakh taxed at 5%, Rs. 7 lakh to 10 lakh at 10%, Rs. 10 lakh to 12 lakh at 15%, Rs. 12 lakh to 15 lakh at 20%, and income above Rs. 15 lakh at 30%.
The Income Tax slab rates under the new tax regime applicable for FY 2024-2025 are as follows:
| Tax Slab for FY 2024-25 | Tax Rate |
| Up to Rs. 3 lakhs | Nil |
| Rs. 3 lakhs – Rs. 7 lakhs | 5% |
| Rs. 7 lakhs – Rs. 10 lakhs | 10% |
| Rs. 10 lakhs – Rs. 12 lakhs | 15% |
| Rs. 12 lakhs – Rs. 15 lakhs | 20% |
| More than 15 lakhs | 30% |
Under the new tax regime, a full tax rebate is available on income up to ₹7 lakh. This means salaried individuals with annual income up to ₹7 lakh pay zero tax. You can switch between the old and new tax regimes every financial year before the ITR due date to choose the most beneficial option.
Budget 2024 has increased the standard deduction under the new tax regime to Rs. 75,000. The family pension deduction has also been increased from Rs. 15,000 to Rs. 25,000. With the revised tax structure the taxpayer will save Rs.17,500.
Most Beneficial Regime For FY 2024-25 (AY 2025-26)
Choosing between the Old and New Tax Regimes depends on your income level, deductions, and exemptions. For salaried individuals with minimal deductions, the New Regime is likely more beneficial due to lower tax rates and a rebate up to ₹7 lakh or ₹12 lakh (based on updated 87A provisions). However, if you claim substantial deductions under Sections 80C, 80D, HRA, or home loan interest, the Old Regime may offer greater tax savings.
Use the ClearTax Income Tax Calculator to compare both options before filing your ITR for FY 2024-25.
Income Tax Slabs Under Old Regime
The slab rates under the old regime has not changed for the recent financial years. The following slab rates are applicable for individuals aged below 60 years and non-residents.
| New Income Tax Slabs | New Income Tax Rates |
| Up to Rs. 2.5 Lakhs | Nil |
| Rs. 2.5 Lakhs to Rs. 5 Lakhs | 5% |
| Rs. 5 Lakhs to Rs. 10 Lakhs | 20% |
| Above Rs. 10 Lakhs | 30% |
Income Tax Slabs applicable for resident senior citizens aged between 60-80 under the old regime years are given below
| New Income Tax Slabs | New Income Tax Rates |
| Up to Rs. 3 Lakhs | Nil |
| Rs. 3 Lakhs to Rs. 5 Lakhs | 5% |
| Rs. 5 Lakhs to Rs. 10 Lakhs | 20% |
| Above Rs. 10 Lakhs | 30% |
For resident super senior citizens aged above 80 years, the basic exemption limit increases to ₹5,00,000.
Note: There is no separate slab benefit for senior citizens under the new tax regime.
Deductions and Exemptions Allowed Under Old and New Regime
The below table helps you understand the deductions and exemptions allowed under the old and new rax regimes:
| Particulars | Old Tax Regime | New Tax Regime (FY 2024-25) |
| Income level for rebate eligibility | Rs. 5 lakhs | Rs. 7 lakhs |
| Standard Deduction | Rs. 50,000 | Rs. 75,000 |
| Effective Tax-Free Salary income | Rs. 5.5 lakhs | Rs. 7.75 lakhs |
| Rebate u/s 87A | Rs.12,500 | Rs.25,000 |
| HRA Exemption | ✓ | X |
| Leave Travel Allowance (LTA) | ✓ | X |
| Other allowances including food allowance of Rs 50/meal subject to 2 meals a day | ✓ | X |
| Standard Deduction | ✓ | ✓ |
| Entertainment Allowance and Professional Tax | ✓ | X |
| Perquisites for official purposes | ✓ | ✓ |
| Interest on Home Loan u/s 24b on: Self-occupied or vacant property | ✓ | X |
| Interest on Home Loan u/s 24b on: Let-out property | ✓ | ✓ |
| Deduction u/s 80C (EPF | LIC | ELSS | PPF | FD | Children’s tuition fee etc) | ✓ | X |
| Employee’s (own) contribution to NPS | ✓ | X |
| Employer’s contribution to NPS | ✓ | ✓ |
| Medical insurance premium – 80D | ✓ | X |
| Disabled Individual – 80U | ✓ | X |
| Interest on education loan – 80E | ✓ | X |
| Interest on Electric vehicle loan – 80EEB | ✓ | X |
| Donation to Political party/trust etc – 80G | ✓ | X |
| Savings Bank Interest u/s 80TTA and 80TTB | ✓ | X |
| Other Chapter VI-A deductions | ✓ | X |
| All contributions to Agniveer Corpus Fund – 80CCH | ✓ | ✓ |
| Deduction on Family Pension Income | Max deduction of Rs. 15,000 | Max deduction of Rs. 25,000 |
| Gifts upto Rs 50,000 | ✓ | ✓ |
| Exemption on voluntary retirement 10(10C) | ✓ | ✓ |
| Exemption on gratuity u/s 10(10) | ✓ | ✓ |
| Exemption on Leave encashment u/s 10(10AA) | ✓ | ✓ |
| Daily Allowance | ✓ | ✓ |
| Conveyance Allowance | ✓ | ✓ |
| Transport Allowance for a specially-abled person | ✓ | ✓ |
Tax Payable under Old vs New Regime for FY 2024-25
Here are a few calculations that will help you decide between the old vs the new tax regime:
- When your gross total income is up-to Rs.7 Lakhs (before Chapter VI-A Deductions and Standard Deduction) and you have Chapter VI A deduction of Rs.1.75 Lakhs, you won’t be taxed under any of the regimes. So you can file under old or new tax regime.
- When your gross total income is greater than Rs.7 Lakhs (before Chapter VI-A Deductions and Standard Deduction) and total Chapter VI A deductions are Rs.1.75 lakhs or less: The new regime will be beneficial.
- When total deductions are more than Rs.4.5 : The old regime will be beneficial
- When total deductions are between Rs.1.75 lakhs to Rs.4.5 lakhs: Will depend on your income level.
When Total Deductions are Rs.1.75 Lakhs or Less: The New Tax Regime will be Beneficial
When Total Deductions are More Than Rs. 4.5 Lakhs: The Old Tax Regime will be Beneficial
When Total Deductions are Between Rs.1.75 Lakhs to Rs.4.5 Lakhs: Will Depend on Various Income Levels
New Tax Regime vs Old Tax Regime – Which Is Better?
To choose between the Old and New Tax Regime, calculate your net taxable income after claiming all eligible exemptions and deductions under the old regime (like HRA, 80C, 80D, etc.). Then, compare the tax liability under both regimes. The regime with lower tax payable is the better choice.
Salaried individuals should inform their employer of their preferred regime for correct TDS deduction.
If you have losses from house property, capital gains, or business income, note that under the new regime, such losses cannot be set off or carried forward. This may affect future tax liabilities, so factor it in before making your decision.
- Choose the new regime if you invest less in tax-saving schemes and your income is less than Rs. 12 lakh.
- Choose the old regime if you have significant deductions to reduce taxable income.
The new tax regime is more beneficial for taxpayers with income up to ₹24 lakh who claim few or no deductions, as it offers lower tax rates without exemptions. In contrast, the old tax regime is better suited for high-income earners who claim significant deductions under Section 80C, home loan interest, or insurance premiums, which can reduce taxable income substantially.
The new tax regime benefits individuals with minimal deductions or those who prefer a simpler filing process. It suits taxpayers with personal or vehicle loan repayments, medical expenses for dependents, or those ineligible for exemptions like HRA, standard deduction, or employer pension contributions.
On the other hand, the old tax regime is ideal for those who can claim significant deductions and exemptions. Senior citizens, in particular, may benefit more under the old regime through Section 80TTB, which allows a ₹50,000 deduction on interest income.
Frequently Asked Questions
What is the old tax regime?
The old tax regime is the existing tax structure under which taxpayers can claim various deductions and exemptions under different sections of the Income Tax Act. It has a higher tax rate but allows taxpayers to claim tax benefits on various investments and expenses.
What is the new tax regime?
The new tax regime has lower tax rates than the old regime but eliminates the tax benefits of various investments and expenses.
Can I switch between the old and new tax regime?
Yes, you can switch between the old and new tax regimes every year at the time of filing their tax returns. However, once you opt for the new tax regime for a year, you cannot claim any tax benefits available in the old tax regime. If you have business income, you can shift from new to old regime, but you have only one time option to shift back to new regime.
Which tax regime is better for 7 lakhs?
If you have an income of Rs 7 lakhs, the new tax regime will benefit you.
Which tax regime is better for a 10 lakhs salary?
For FY 2025-26, for a salary income of Rs. 10 lakh, then the new tax regime will be beneficial as income upto Rs. 12 lakh is tax-free due to rebate u/s 87A.
Which tax regime is better for a 12.5 lakhs salary?
For FY 2025-26, if your salary is Rs. 12.5 lakh per annum then opting for the new tax regime would be beneficial as a standard deduction of Rs. 75,000 will be available to you and you will be eligible for Rebate u/s 87A as your taxable income will be less than Rs. 12 lakh after standard deduction.
Which tax regime is better for 15 lakhs salary?
Which regime is better for you will depend on the amount of tax-saving investments you have made:
- Old regime: if tax-saving investments > Rs. 4,08,500
- New regime: if tax-saving investments < Rs 4,08,500
Which tax regime is better for 20 lakhs salary?
If you have an income of Rs 20 lakhs, the best regime for you will depend on the tax deductions you are eligible for:
- Old regime: if tax-saving investments > Rs. 4.5 lakhs
- New regime: if tax-saving investments < Rs 4.5 lakhs
Which tax regime is better for 25 lakhs salary?
If you have an income of Rs 25 lakhs, the best regime for you will depend on the tax deductions you are eligible for:
- Old regime: if tax-saving investments > Rs. 4.5 lakhs
- New regime: if tax-saving investments < Rs 4.5 lakhs
Which tax regime is better for a 30 lakhs salary?
If you have an income of Rs 30 lakhs, the new regime will benefit you if your tax deductions are less than Rs 4.5 lakhs. Otherwise, opt in for the old tax regime.
What deductions are allowed in the new tax regime?
One can claim few selective deductions under the new tax regime for FY 2024-25 such as standard deduction of Rs.75,000, interest on Home Loan u/s 24b on let-out property, employer’s contribution to NPS u/s 80CCD, Contributions to Agniveer Corpus Fund u/s 80CCH, Deduction on Family Pension Income (lower of 1/3rd of actual pension or 15,000) is applicable for the FY 24-25.
Is HRA exemption available in the new tax regime?
No, HRA exemption u/s10(13A) is not allowed in the new tax regime.
Which form shall be filed for opting for the old tax regime?
Form 10-IEA must be filed for opting to pay taxes under the old tax regime.
In the old tax regime, senior citizens benefit from special tax rate advantages. Are there similar benefits in the new tax regime?
In the old tax regime, the basic exemption limit for senior citizens is Rs. 3 lakhs and for super senior citizens is Rs. 5 lakhs. In the new tax regime, the basic exemption limit is Rs. 3 lakhs for all the individuals irrespective of their age.