The tax regime you choose for FY 2025-26 can save you anywhere from nothing to ₹1,00,000 or more, depending on your salary and how many deductions you claim. And plenty of people pick the wrong one, usually by letting the default new regime decide for them without ever running the comparison. Here is the side-by-side that settles it, with a simple break-even rule and the cases where each regime wins.
The tax slabs compared
The two regimes start from completely different slab structures. The new regime has broad, low rates; the old regime has higher rates but lets you subtract deductions first.
| Income (new regime) | Rate |
|---|---|
| Up to ₹4,00,000 | 0% |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
A ₹75,000 standard deduction plus the beefed-up Section 87A rebate make income up to ₹12.75 lakh effectively tax-free under the new regime, with no investments needed. The old regime, by contrast, runs on the long-standing slabs below, but lets you claim the full menu of deductions.
| Income (old regime) | Rate |
|---|---|
| Up to ₹2,50,000 | 0% |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
On top of these slabs the old regime lets you subtract 80C, HRA, home-loan interest, 80D and more before any tax is calculated. That is the whole reason it can still be cheaper despite the higher rates.
The break-even rule
Here is the quick mental model. The old regime starts to win once your total deductions get large enough to pull your taxable income down past the new regime's advantage. As a rough rule of thumb, once your combined deductions cross roughly ₹3.5 to ₹4 lakh, it is worth running the old-regime numbers properly. Below that, the new regime usually comes out ahead.
Which regime by salary and deductions
| Situation | Usually cheaper | Why |
|---|---|---|
| Up to ₹12.75 lakh, few deductions | New | Rebate makes it tax-free |
| ₹15 lakh, heavy deductions | Old | HRA + 80C + loan interest |
| ₹15 lakh, few deductions | New | Lower slab rates |
| ₹20 lakh, maxed deductions | Old | Deductions outweigh rates |
| Very high income, no deductions | New | Lower rates + surcharge cap |
When the old regime wins
- You pay real rent and claim a large HRA exemption.
- You have home-loan interest of up to ₹2 lakh under Section 24(b).
- You max out your ₹1.5 lakh of 80C investments.
- You add the extra ₹50,000 of NPS under 80CCD(1B).
- You pay health insurance premiums claimed under 80D.
When the new regime wins
- You have no home loan and live in your own house.
- You have few or no 80C investments.
- Your income is up to about ₹12.75 lakh, where the rebate makes it tax-free.
- You prefer keeping your cash liquid rather than locking it away for deductions.
Stop guessing, calculate it
The blanket claims that "the new regime is better" or "the old regime is better" are both misleading, because the answer flips with your deductions. The only reliable approach is to run your own numbers both ways. Our free salary and tax calculator shows your liability under both regimes side by side, so the cheaper option is obvious. For the full breakdown of slabs, the ₹12 lakh rebate cliff and marginal relief, read our in-depth new vs old tax regime guide.
This is general information, not tax advice. Slabs and rules can change. Confirm your position with a qualified chartered accountant or the official income tax portal before filing.
Financial Disclaimer: The comparisons on this page are for informational and educational purposes only. Returns, rates and tax rules are subject to change. Past investment performance does not guarantee future results. Consult a qualified financial advisor before making investment or tax decisions. Full disclaimer.
Frequently asked questions
Which tax regime saves more in FY 2025-26?
It depends entirely on your deductions, not just your salary. The new regime wins for most people with few deductions, and it makes income up to about ₹12.75 lakh tax-free thanks to the rebate and standard deduction. The old regime wins when your total deductions are large, typically once they cross roughly ₹3.5 to ₹4 lakh through 80C, HRA, home-loan interest and NPS combined. The only reliable way to know is to calculate your tax both ways.
Is income up to ₹12 lakh tax-free in the new regime?
For FY 2025-26, a Section 87A rebate makes taxable income up to ₹12,00,000 effectively tax-free under the new regime. Add the ₹75,000 standard deduction and a salaried person earning around ₹12.75 lakh can pay zero tax. Cross ₹12 lakh of taxable income and the rebate stops, though marginal relief softens the jump for incomes just above the line.
Can I claim HRA and 80C in the new regime?
No. The new regime gives lower slab rates but removes most deductions and exemptions, including 80C, HRA, LTA and 80D. It keeps only the ₹75,000 standard deduction and the employer's NPS contribution under 80CCD(2). If you rely on large deductions like HRA or home-loan interest, those live only in the old regime, which is exactly why the old regime can still be cheaper despite higher rates.
Which regime is the default?
The new tax regime is the default. If you do nothing when you file, your income is taxed under the new regime's slabs. Salaried taxpayers can switch between the two every financial year, but you have to actively opt for the old regime if it is cheaper for you. Many people lose money simply by letting the default decide for them.
When does the old regime save more tax?
The old regime tends to win when you claim significant deductions: paying real rent with HRA, home-loan interest up to ₹2 lakh under Section 24(b), a full ₹1.5 lakh under 80C, the extra ₹50,000 of NPS under 80CCD(1B), and health insurance under 80D. Stack these up and your taxable income can fall far enough that the higher rates still leave you paying less than the new regime would.