Last reviewed: 8 July 2026. Choosing between the old and new tax regime is not a matter of opinion — it is arithmetic. For FY 2025-26 (AY 2026-27) the new regime has become materially more attractive after the enhanced rebate, yet the old regime still wins for taxpayers carrying large, genuine deductions. This guide gives you the exact slabs, a break-even rule of thumb, and worked examples so you can decide with numbers, not guesswork.
Quick answer
Start with the legal position, not payroll guesswork
Under Section 115BAC the new regime applies automatically unless you opt out. A salaried person can compare and switch every year directly in the return. But anyone with business or professional income must file Form 10-IEA to move to the old regime, and the law limits how often they can switch back — so this is a decision to make deliberately, not casually through a payroll declaration.
The slabs side by side (FY 2025-26)
| Taxable income | New regime | Old regime |
|---|---|---|
| Up to Rs 2,50,000 | Nil | Nil |
| Rs 2,50,001 - 4,00,000 | Nil | 5% |
| Rs 4,00,001 - 5,00,000 | 5% | 5% |
| Rs 5,00,001 - 8,00,000 | 5% | 20% |
| Rs 8,00,001 - 10,00,000 | 10% | 20% |
| Rs 10,00,001 - 12,00,000 | 10% | 30% |
| Rs 12,00,001 - 16,00,000 | 15% | 30% |
| Rs 16,00,001 - 20,00,000 | 20% | 30% |
| Rs 20,00,001 - 24,00,000 | 25% | 30% |
| Above Rs 24,00,000 | 30% | 30% |
Standard deduction is Rs 75,000 in the new regime and Rs 50,000 in the old. The Section 87A rebate is up to Rs 60,000 in the new regime (nil tax to Rs 12 lakh) and Rs 12,500 in the old (nil tax to Rs 5 lakh). A 4% health and education cess applies on top in both.
What still survives in the new regime
The new regime removes most deductions, but a few valuable ones remain, including the Rs 75,000 standard deduction, the employer's contribution to NPS under Section 80CCD(2), and certain allowances. What you lose are the familiar 80C, 80D, HRA, home-loan interest on a self-occupied house and Chapter VI-A deductions — which is exactly why the old regime only pays off when those add up to a large number.
Break-even: how much deduction do you actually need?
The practical question is not "which is lower" in the abstract, but "how much old-regime deduction do I need before it beats the new regime?" The table below shows the approximate deductions (over and above the standard deduction) a salaried taxpayer needs for the old regime to match the new one.
| Gross salary | New-regime tax (incl. cess) | Deductions needed for old regime to win |
|---|---|---|
| Rs 12,00,000 | Rs 0 | ~Rs 6,50,000 (to even reach nil) |
| Rs 15,00,000 | ~Rs 97,500 | ~Rs 5,40,000 |
| Rs 20,00,000 | ~Rs 1,92,400 | ~Rs 7,10,000 |
| Rs 25,00,000 | ~Rs 3,19,800 | ~Rs 8,00,000 |
Assumes a salaried individual claiming the standard deduction, resident below 60, ignoring surcharge and marginal-relief edge cases.
Worked examples
1) Salary Rs 10 lakh, deductions Rs 2 lakh (typical 80C + 80D). New regime: taxable Rs 9.25 lakh → within the rebate, so tax is nil. Old regime: taxable Rs 7.5 lakh → about Rs 65,000 after cess. The new regime wins clearly.
2) Salary Rs 15 lakh, deductions Rs 3 lakh. New regime: taxable Rs 14.25 lakh → about Rs 97,500. Old regime: taxable Rs 11.5 lakh → about Rs 1,63,800. The new regime still wins.
3) Salary Rs 15 lakh, deductions Rs 6 lakh (home-loan interest + 80C + 80D + more). New regime: about Rs 97,500. Old regime: taxable Rs 8.5 lakh → about Rs 85,800. Here the old regime finally wins — because the deductions crossed the break-even.
So who should pick which?
- New regime usually suits: younger earners, renters without large 80C investments, those without a home loan, and most incomes up to about Rs 12-13 lakh where the rebate makes tax nil or minimal.
- Old regime deserves a serious test if: you have a home-loan interest of up to Rs 2 lakh, full 80C, meaningful 80D, HRA in a metro, and your total deductions plausibly cross the break-even numbers above.
Common mistakes to avoid
- Choosing the regime only from the payroll declaration and never re-checking at filing, when the return is where the final choice legally counts for the salaried.
- Assuming the old regime is "always better because of 80C" — at most income levels it now is not.
- Business and professional taxpayers switching casually and losing the option to move back, without filing Form 10-IEA correctly.
- Senior citizens applying a salaried-under-60 shortcut and ignoring the higher 80D and 80TTB benefits that can tilt the old regime in their favour.
Frequently asked questions
Is the new tax regime compulsory for AY 2026-27?
No. The new regime under Section 115BAC is the default, but you can still choose the old regime. Salaried taxpayers can switch every year in the return; those with business or professional income must file Form 10-IEA to opt out, and switching back is restricted.
Up to what income is there zero tax in the new regime?
For FY 2025-26, a resident individual pays zero tax up to Rs 12,00,000 of taxable income because of the enhanced Section 87A rebate (up to Rs 60,000). For salaried taxpayers, the Rs 75,000 standard deduction pushes the effective tax-free salary to about Rs 12.75 lakh.
How much in deductions do I need for the old regime to be better?
It rises with income. On a salaried income of about Rs 15 lakh you need roughly Rs 5.4 lakh of deductions (beyond the standard deduction) for the old regime to beat the new one; around Rs 7 lakh at Rs 20 lakh income and about Rs 8 lakh at Rs 25 lakh.
Does the standard deduction apply in both regimes?
Yes, but the amounts differ: Rs 75,000 in the new regime and Rs 50,000 in the old regime for salaried individuals and pensioners.
Can I change the regime every year?
Salaried individuals without business income can choose afresh each year while filing the return. Taxpayers with business or professional income get only a limited, once-type switch and must use Form 10-IEA.
Which regime is better for senior citizens?
It depends on their deduction profile. Senior citizens with large 80C, 80D (higher medical limits) and interest deductions under 80TTB may still find the old regime better, so both should be computed before deciding.
We compute both regimes on your actual salary, deductions and other income, and file the return in the option that is correct for you.
Income Tax Filing Notice Management Talk to usDisclaimer: This article is for general guidance only. Your regime choice depends on your full income, deductions, residential status and the latest law. Please seek specific advice before filing.
Talk to CA Somesh Chandak & Associates - we are happy to help.
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