Old vs New Tax Regime: Which One Should You Choose?
Category: Income Tax | Published: 30 September 2026 | Last Updated: 30 September 2026
Compare the old and new income tax regimes — slab rates, standard deduction, rebate and deductions — and learn how to decide which one suits you.
Individuals in India can pay tax under the new tax regime (lower rates, very few deductions) or the old tax regime (higher rates, but deductions and exemptions allowed). The new regime is the default. This guide compares the two for FY 2025-26 (AY 2026-27).
New Tax Regime Slabs (FY 2025-26)
Up to ₹4 lakh: Nil
₹4 lakh – ₹8 lakh: 5%
₹8 lakh – ₹12 lakh: 10%
₹12 lakh – ₹16 lakh: 15%
₹16 lakh – ₹20 lakh: 20%
₹20 lakh – ₹24 lakh: 25%
Above ₹24 lakh: 30%
Standard deduction for salaried individuals and pensioners: ₹75,000. A rebate of up to ₹60,000 makes tax nil for resident individuals with taxable income up to ₹12 lakh (the rebate does not apply to special-rate income such as certain capital gains).
Old Tax Regime Slabs (FY 2025-26, below 60 years)
Up to ₹2.5 lakh: Nil
₹2.5 lakh – ₹5 lakh: 5%
₹5 lakh – ₹10 lakh: 20%
Above ₹10 lakh: 30%
Higher basic exemption limits apply to senior citizens (₹3 lakh) and super senior citizens (₹5 lakh). Standard deduction: ₹50,000. Rebate of up to ₹12,500 makes tax nil for taxable income up to ₹5 lakh.
Health and education cess of 4% and surcharge (for higher incomes) apply under both regimes.
Deductions: The Main Difference
The old regime allows deductions and exemptions such as section 80C investments, 80D health insurance, HRA, home loan interest on a self-occupied house and others. Most of these are not available in the new regime. The employer's contribution to NPS and the standard deduction are among the few benefits allowed in the new regime.
A Simple Example
A salaried person with a salary of ₹12,75,000 and no other income: under the new regime, taxable income after the ₹75,000 standard deduction is ₹12,00,000, and the rebate makes the tax nil. Under the old regime, the same person would need very large deductions to match that. For higher incomes the answer depends on how much you actually claim in deductions.
How to Decide
List the deductions you genuinely claim — 80C, 80D, HRA, home loan interest and so on.
Calculate tax under both regimes (the income tax portal and your tax consultant can help).
Choose the lower one, but remember the new regime needs no investment proofs.
Switching Rules
No business income (for example, salaried): you can choose each year at the time of filing the return on time.
With business or professional income: to use the old regime you must file Form 10-IEA by the due date, and the option to switch back is limited.
What Changes from April 2026?
The Income-tax Act, 2025 applies from 1 April 2026 and uses the term "tax year". Reports indicate the slab rates, standard deduction and rebate remain the same for FY 2026-27. Please confirm the position for your year before filing.
Frequently Asked Questions
Is the new regime better for everyone?
No. People with large deductions — for example a big home loan interest claim plus full 80C and 80D — may still pay less under the old regime.
Can I tell my employer one regime and file under another?
Salaried people without business income can choose a different regime when filing the return. TDS may then differ from final tax, resulting in a refund or balance payment.
Want us to compare both regimes for you? See our Income Tax Services or contact us.
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Disclaimer: This article is general information based on the rules as on the Last Updated date above. Tax rules, rates and due dates change, so please verify on the official portal or consult us before acting. It is not professional advice for your specific situation.