The two regimes side by side
Old regime (default until FY 2022-23, available to all in 2025-26):
Slabs FY 2025-26
- Nil up to Rs 2,50,000
- 5 percent on Rs 2,50,001 to Rs 5,00,000
- 20 percent on Rs 5,00,001 to Rs 10,00,000
- 30 percent above Rs 10,00,000
Deductions allowed: 80C (Rs 1.5L), 80CCD(1B) NPS (Rs 50K), 80D health (Rs 25K + Rs 50K for senior parents), 80E education loan interest (no cap), HRA exemption, home loan interest (Section 24, up to Rs 2L self-occupied), 80G donations, standard deduction Rs 50,000, professional tax.
Section 87A rebate: full tax waived up to Rs 5 lakh taxable income.
New regime (Section 115BAC, default since FY 2023-24):
Slabs FY 2025-26
- Nil up to Rs 3,00,000
- 5 percent on Rs 3,00,001 to Rs 7,00,000
- 10 percent on Rs 7,00,001 to Rs 10,00,000
- 15 percent on Rs 10,00,001 to Rs 12,00,000
- 20 percent on Rs 12,00,001 to Rs 15,00,000
- 30 percent above Rs 15,00,000
Deductions allowed: standard deduction Rs 75,000, Section 80CCD(2) employer NPS contribution up to 14 percent of salary. NO 80C, NO HRA, NO home loan interest (for self-occupied), NO 80D for individual claims.
Section 87A rebate: full tax waived up to Rs 12 lakh taxable income (Rs 12.75 lakh for salaried after standard deduction).
Break-even math: when does old win?
Old regime wins when your total deductions exceed the slab-rate gap.
Worked break-even at common income levels (FY 2025-26):
| Rs 10 lakh income | Rs 15 lakh income | Rs 25 lakh income | Rs 50 lakh income |
|---|---|---|---|
| Old regime tax at zero deductions: Rs 1,12,500 (5% on 2.5L + 20% on 5L) | Old tax at zero deductions: Rs 2,62,500 (5% on 2.5L + 20% on 5L + 30% on 5L) | Old tax at zero deductions: Rs 5,62,500 | Gap remains similar; deductions of Rs 4-5 lakh tip the scale. |
| New regime tax at zero deductions: Rs 52,500 (0% on 3L + 5% on 4L + 10% on 3L) | New tax at zero deductions: Rs 1,42,500 | New tax at zero deductions: Rs 4,42,500 | |
| Gap: Rs 60,000 | Gap: Rs 1,20,000 | Gap: Rs 1,20,000 | |
| For old to win, deductions must save more than Rs 60,000 in old tax | For old to win, deductions need to save Rs 1.2 lakh in old | Break-even unchanged at Rs 4 lakh deductions | |
| At marginal 30%: deductions of Rs 2 lakh save Rs 60,000 | At 30% marginal: Rs 4 lakh of deductions | ||
| Break-even: Rs 2 lakh of deductions (standard Rs 50K + Rs 1.5L 80C alone) | Break-even: roughly Rs 4 lakh (standard + 80C + HRA + 80D + home loan would do it) |
General rule: if your old-regime deductions including standard, 80C, HRA, home loan, and 80D total above Rs 4-5 lakh, old regime wins. Otherwise new wins.
| Taxable income | Old regime | New regime |
|---|---|---|
| Up to Rs 2.5L | 0% | 0% |
| Rs 2.5L - Rs 3L | 5% | 0% |
| Rs 3L - Rs 5L | 5% | 5% |
| Rs 5L - Rs 7L | 20% | 5% |
| Rs 7L - Rs 10L | 20% | 10% |
| Rs 10L - Rs 12L | 30% | 15% |
| Rs 12L - Rs 15L | 30% | 20% |
| Above Rs 15L | 30% | 30% |
| Standard deduction | Rs 50,000 | Rs 75,000 |
| 87A rebate ceiling | Rs 5,00,000 | Rs 12,00,000 |
| Gross income | New regime tax | Old regime tax (zero deduct) | Deductions for old to win |
|---|---|---|---|
| Rs 10L | Rs 52,500 | Rs 1,12,500 | Rs 2.0L |
| Rs 15L | Rs 1,42,500 | Rs 2,62,500 | Rs 4.0L |
| Rs 20L | Rs 2,57,500 | Rs 4,12,500 | Rs 4.0L |
| Rs 25L | Rs 4,42,500 | Rs 5,62,500 | Rs 4.0L |
| Rs 50L | Rs 12,42,500 | Rs 13,12,500 | Rs 4.0-5.0L |
Who old regime works best for
- Home loan borrowers: home loan interest up to Rs 2 lakh under Section 24 (self-occupied) is unique to old regime. A Rs 50 lakh loan at 8.5% creates Rs 4+ lakh annual interest, capped at Rs 2L. This Rs 2L deduction at 30% slab saves Rs 62,400 - significant.
- Heavy 80C users with EPF + PPF + ELSS + home loan principal hitting Rs 1.5 lakh.
- Metro renters with high HRA (Rs 30K+ monthly). HRA exemption above Rs 2-3 lakh annually swings the calculation.
- Senior parents in 80D: Rs 50K deduction per senior parent.
- Education loan repayers: 80E interest deduction (no cap).
Who new regime works best for:
- Young salaried with limited 80C investment, no rent, no home loan.
- High earners (Rs 15+ lakh) without large deductions. The lower slab rates dominate.
- NRIs (no HRA, no Section 24).
- Income under Rs 12 lakh: the new regime 87A rebate makes it effectively tax-free.
- Anyone preferring simplicity - no investment proofs to track.
Year-on-year regime switching
For salaried (non-business) taxpayers: the regime choice is made each year. You can pick old in FY 2024-25 and new in FY 2025-26 freely.
For business income earners: more restrictive. Once you opt OUT of the new regime, you can opt back IN only once. After that second switch, you are locked into one regime for life. Use Form 10-IEA for this opt-out.
For salaried + capital gains only (no business): full annual flexibility.
Mid-year switching is NOT allowed. You choose at the start of FY by informing your employer via Form 12BB. If not informed, employer defaults to new regime for TDS.
At ITR time, you can still switch to old regime if you originally let employer default to new. The refund flows to you.
Best practice: run the regime comparator each March. Pick the winner for the upcoming year. Inform employer in April. Reconfirm at year-end.
Filing the right regime in ITR
In ITR-1 or ITR-2:
Step 1: at the top of the personal info section, select "Tax Regime: New" or "Tax Regime: Old."
Step 2: if selecting old, declare all deductions under Chapter VI-A (80C, 80D, 80E, 80G, etc.) and Section 24 (home loan interest).
Step 3: if selecting new, only standard deduction Rs 75,000 is automatically applied. You can still claim 80CCD(2) employer NPS.
Step 4: portal computes both regime taxes for cross-check. Make sure your selection matches your intent.
Step 5: file. If you realize you picked the wrong regime, file a revised return before March 31 of the next assessment year.
IMPORTANT: business or professional income earners must file Form 10-IEA at the BEGINNING of the FY to opt OUT of the new regime. Without 10-IEA, business income is treated under new regime by default, and you cannot switch at ITR time.
Run the math for your situation
Use our IN calculator to plug in your own numbers.