India has two income-tax regimes for individuals, and you can pick the one that leaves you with more money. Since the 2025 budget, the new regime has become the better choice for most taxpayers — but not for everyone. Here is how to tell which group you are in. All figures below are for the financial year 2025-26, before the 4% health and education cess.
The two regimes in a line each
- Old regime — higher slab rates, but you can claim a long list of deductions and exemptions.
- New regime — lower rates and wider slabs, with very few deductions. It is the default: if you don’t choose, this is what applies.
New regime slabs
| Taxable income | Rate |
|---|---|
| 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% |
A rebate of up to ₹60,000 means there is no tax at all on taxable income up to ₹12 lakh. For a salaried person, add the ₹75,000 standard deduction and a salary of up to ₹12.75 lakh is tax-free. (The rebate does not cover income taxed at special rates, such as capital gains on shares.)
Old regime slabs
| Taxable income | Rate |
|---|---|
| Up to ₹2.5 lakh (₹3 lakh at 60+, ₹5 lakh at 80+) | Nil |
| ₹2.5 lakh – ₹5 lakh | 5% |
| ₹5 lakh – ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
Under the old regime, taxable income up to ₹5 lakh is tax-free after the rebate, and salaried people get a ₹50,000 standard deduction.
What you give up in the new regime
Choosing the new regime means giving up most deductions, including Section 80C investments, 80D health insurance, house rent allowance, leave travel allowance, interest on a home loan for a self-occupied house and the extra ₹50,000 for your own NPS contribution. You keep the standard deduction, your employer’s NPS contribution, and interest on a loan for a let-out property against its rent.
A quick way to decide
Add up every deduction you would genuinely claim under the old regime — not ones you might make — and compare it with the break-even figure for your salary:
| Annual salary | Tax in the new regime | Old regime wins only if your deductions exceed about |
|---|---|---|
| ₹12.75 lakh | Nil | New regime always wins |
| ₹15 lakh | ₹93,750 | ₹5.4 lakh |
| ₹20 lakh | ₹1,85,000 | ₹7.1 lakh |
| ₹25 lakh | ₹3,07,500 | ₹8 lakh |
For comparison, a typical salaried person who fills 80C (₹1.5 lakh) and buys family health insurance (₹25,000) claims ₹1.75 lakh — nowhere near the break-even. The old regime still wins for people with large HRA claims in big cities, sizeable home-loan interest and full use of every deduction.
Run the numbers every year. A new home loan, a move to a rented flat or a salary hike can change the answer.
Switching between regimes
- Salaried, with no business income — you can choose afresh every year when filing your return. Tell your employer your choice at the start of the year so that TDS is deducted correctly, but the final decision is made in the ITR.
- With business or professional income — opting out of the new regime needs a separate form filed before the due date, and after you have moved out you can come back to the new regime only once.
Not sure which way to go? Share your salary slip and investment details with our income-tax team and we’ll calculate both regimes for you, free, before you file.
This article is general guidance based on the rules in force on its publish date, not professional advice for your specific case. Tax and company rules change often — check your situation with us before you act.
