1. What changed in FY 2025-26?
The Union Budget 2025-26 made the new tax regime significantly more attractive. The key changes:
- Higher rebate: No tax up to ₹12 lakh taxable income under the new regime (₹12.75 lakh for salaried, after the ₹75,000 standard deduction).
- Revised slabs: The new regime now has 7 slabs starting at ₹4 lakh, with rates of 0%, 5%, 10%, 15%, 20%, 25%, and 30%.
- Old regime unchanged: The old regime still offers the same slab rates and deductions (80C, 80D, HRA, etc.).
💡 The new regime is now the default. You must actively opt for the old regime if you want to claim deductions like 80C, HRA, or home loan interest.
2. New regime slabs (FY 2025-26)
| Income slab | 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% |
3. Old regime slabs (FY 2025-26)
| Income slab | 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% |
Senior citizens (60–80) have a basic exemption of ₹3 lakh; super seniors (80+) have ₹5 lakh.
4. Surcharge rates
Surcharge applies on top of slab tax at higher income levels:
| Income range | Surcharge (old) | Surcharge (new) |
|---|---|---|
| ₹50 lakh – ₹1 crore | 10% | 10% |
| ₹1 crore – ₹2 crore | 15% | 15% |
| ₹2 crore – ₹5 crore | 25% | 25% |
| Above ₹5 crore | 37% | 25% (capped) |
Health and education cess of 4% applies on tax + surcharge in both regimes.
5. Which regime should you choose?
The decision comes down to one question: do your total deductions exceed the benefit of the new regime’s lower slab rates?
- Choose new regime if: Your deductions are low (under ₹4–4.5 lakh), or you don’t claim HRA/80C aggressively.
- Choose old regime if: You claim substantial deductions (80C ₹1.5L, 80D, HRA, home loan interest ₹2L, NPS ₹50K) that bring your taxable income down significantly.
- Break-even: For most salaried individuals, the break-even is around ₹4.5–5 lakh in total deductions. Above that, the old regime tends to win.
✓ Use the calculator above with your actual numbers. The break-even varies with income level, age, and the exact deductions you claim.
6. Common mistakes
- Assuming old regime is always better: For many low-deduction taxpayers, the new regime now saves more.
- Forgetting the standard deduction: Salaried employees get ₹50,000 (old) or ₹75,000 (new). This changes the math.
- Ignoring surcharge: At higher incomes, surcharge can add 10%–37%, changing the regime comparison.
- Not accounting for marginal relief: Just above ₹12 lakh or a surcharge threshold, marginal relief limits how much extra tax you pay.
- Forgetting cess: 4% cess applies on everything — include it in your comparison.
7. Final thoughts
The new regime is simpler and, for many taxpayers, now cheaper. But the old regime still wins for those who claim large deductions. The only way to know for sure is to run the numbers with your actual income and deductions.
Use this calculator to compare both regimes side by side. Review every year — as your income and deductions change, so does the optimal choice.
