Old vs New Tax Regime: Which is Better for FY 2025-26?
Updated for FY 2025-26 (AY 2026-27)
Every salaried taxpayer in India faces the same question each year: old regime or new regime? The honest answer is it depends on your deductions. This guide explains the trade-off in plain English and gives you a quick rule of thumb — then you can confirm with the income tax calculator.
The core trade-off
The two regimes pull in opposite directions:
- New regime — lower slab rates, but you give up almost every deduction (HRA, 80C, 80D, home-loan interest). You only get the ₹75,000 standard deduction.
- Old regime — higher slab rates, but you can claim the full suite of deductions to shrink your taxable income.
Quick comparison
| Feature | Old Regime | New Regime |
|---|---|---|
| Standard deduction | ₹50,000 | ₹75,000 |
| HRA exemption | ✅ Yes | ❌ No |
| 80C (₹1.5L) | ✅ Yes | ❌ No |
| 80D, NPS, home loan | ✅ Yes | ❌ No |
| Zero-tax income limit (87A) | ₹5 lakh | ₹12 lakh |
Rule of thumb
Add up the deductions you can realistically claim — HRA, full 80C, 80D, NPS, home-loan interest. As a rough guide:
- If your total deductions are large (say above ₹4–4.5 lakh), the Old regime usually wins.
- If you don't claim many deductions (renting without HRA proof, no 80C investments), the New regime usually wins thanks to its lower rates and bigger standard deduction.
The more deductions you genuinely use, the more the Old regime tilts in your favour. The break-even point shifts with income, so the only way to be sure is to compute both.
Don't guess — see which regime saves you more in 10 seconds.
Compare Old vs New →What about ₹12 lakh tax-free?
For FY 2025-26, the New regime's Section 87A rebate makes income up to ₹12 lakh completely tax-free — about ₹12.75 lakh for salaried after the standard deduction. This is a big reason the New regime is now the default for many people. Read how the ₹12 lakh rebate works.
How to decide in practice
- Enter your salary in the calculator.
- Add your real deductions — HRA, 80C, 80D, NPS, home loan.
- It computes both regimes and highlights the cheaper one with your exact saving.