Is the new tax regime compulsory for FY 2025-26?

The new regime is the default, but it is not compulsory. Salaried employees can opt for the old regime by informing their employer at the start of the financial year, or while filing returns.

Can I claim 80C deductions in the new tax regime?

No. Section 80C deductions (PPF, ELSS, LIC, etc.) are not allowed under the new regime. Only the standard deduction of ₹75,000 and employer NPS contribution under 80CCD(2) are available.

At what income level does the old regime become better?

There is no fixed income level — it depends on your deductions. Generally, if your total deductions and exemptions (80C + 80D + HRA + home loan interest + NPS) exceed ₹3.75 lakh, you should compare both regimes carefully.

Is income up to ₹12 lakh really tax-free in the new regime?

Yes. With the Section 87A rebate in the new regime, taxable income up to ₹12 lakh is effectively tax-free. After the ₹75,000 standard deduction, gross salary up to ₹12.75 lakh results in zero tax.

Can I switch between old and new regime every year?

Salaried employees can switch between regimes every financial year. Those with business income who opt out of the new regime can switch back only once in their lifetime.

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Old Tax Regime vs New Tax Regime 2025-26 — Which Saves More?

Compare old and new tax regimes for FY 2025-26 at every income level. Find which regime saves you more tax.

JeevanPulse Editorial Team

1 April 2025

10 min read 574 words

taxincome taxtax regimetax savingbudget 2025

Key Changes in Tax Regime for FY 2025-26

The Union Budget 2025 made the new tax regime even more attractive. Here are the key changes:

Revised slabs: Income up to ₹4 lakh is tax-free. The 5% slab covers ₹4–8 lakh, 10% for ₹8–12 lakh, 15% for ₹12–16 lakh, 20% for ₹16–20 lakh, 25% for ₹20–24 lakh, and 30% above ₹24 lakh.
Standard deduction: Increased to ₹75,000 for salaried employees under the new regime.
Tax rebate: Under Section 87A, income up to ₹12 lakh (₹12.75 lakh after standard deduction) is effectively tax-free in the new regime.
Old regime unchanged: The slabs and deductions in the old regime remain the same — ₹2.5 lakh exemption, 5% up to ₹5 lakh, 20% up to ₹10 lakh, 30% above.

The new regime is now the default for all taxpayers. You must actively opt in to the old regime if you want to claim deductions like 80C, 80D, and HRA.

Tax Comparison Table: Old vs New Regime

This table assumes the old regime taxpayer claims standard deduction of ₹50,000 plus ₹1.5 lakh (80C) + ₹25,000 (80D) + ₹50,000 (NPS 80CCD). Total deductions: ₹2.75 lakh. New regime assumes ₹75,000 standard deduction only.

Gross Income	Tax (Old Regime)	Tax (New Regime)	You Save With
₹5 Lakh	₹0 (rebate)	₹0 (rebate)	Same
₹7.5 Lakh	₹44,200	₹0 (rebate)	New Regime
₹10 Lakh	₹1,06,600	₹0 (rebate)	New Regime
₹12 Lakh	₹1,66,400	₹0 (rebate)	New Regime
₹15 Lakh	₹2,57,400	₹1,30,000	New Regime
₹20 Lakh	₹4,12,100	₹2,85,000	New Regime
₹25 Lakh	₹5,72,000	₹4,60,000	New Regime

When to Choose the Old Regime

The old regime may still save money if your total deductions and exemptions exceed approximately ₹3.75 lakh. This typically applies if you:

Pay high rent in a metro city and claim substantial HRA exemption
Have a home loan with interest deduction under Section 24(b) up to ₹2 lakh
Maximize 80C (₹1.5L), 80D (₹50K for self + parents), and NPS 80CCD(1B) (₹50K)
Have education loan interest under Section 80E

At high salary levels (₹25 lakh+), those with home loans and HRA should always compare both regimes carefully.

When to Choose the New Regime

The new regime is the clear winner if:

Your total deductions are less than ₹3.75 lakh
You live in your own house (no HRA benefit) or in a Tier-2 city with low rent
You don't have a home loan
Your income is ₹12 lakh or below — you pay zero tax under the new regime
You prefer simplicity and don't want to invest just for tax saving

For the vast majority of salaried Indians — especially those earning under ₹15 lakh — the new regime is now better.

Deductions Available Only in Old Regime

The old regime allows numerous deductions that are not available in the new regime:

Section 80C (₹1.5 lakh): EPF, PPF, ELSS, life insurance, children's tuition fees, home loan principal
Section 80D: Health insurance — ₹25,000 for self/family, ₹50,000 for senior citizen parents
Section 80CCD(1B): Additional ₹50,000 for NPS contributions
HRA Exemption: Based on rent paid, salary, and city of residence
Section 24(b): Home loan interest up to ₹2 lakh
Section 80E: Entire interest on education loan
Section 80G: Donations to specified funds and charities

The new regime only allows the standard deduction (₹75,000) and employer NPS contribution under 80CCD(2).

Step-by-Step: How to Decide

Follow this simple process to pick the right regime:

Step 1: Calculate your gross income (CTC minus employer EPF and gratuity)
Step 2: List all deductions you can realistically claim — 80C, 80D, HRA, home loan interest, NPS
Step 3: If total deductions exceed ₹3.75 lakh, compute tax under both regimes and compare
Step 4: If total deductions are under ₹3.75 lakh, the new regime will almost certainly be better
Step 5: Use our tax calculator below for an exact comparison

Pro tip: Salaried employees can switch between regimes every year. Business owners choosing old regime can only switch back to new once in a lifetime.